Petition for Writ of Certiorari — Rose Acre Farms, Inc. v. Madigan
Supreme Court brief1992
Ask Donna
What actually matters in this document.
Text
Si ey es “FILED
g AY 22 1992
| dimoee as ——
ae ' wwe ~ pit CLERK
= . fteewmert
IN THE
Supreme Court of the United § States
OCTOBER TERM, 1991
ROSE ACRE FARMS, INC.,
Petitioner,
V.
EDWARD MADIGAN, SECRETARY OF
AGRICULTURE OF THE UNITED STATES, et al.,
Respondents.
Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Seventh Circuit
PETITION FOR A WRIT OF CERTIORARI
BRIAN K. BURKE
Counsel of Record
JOHN R. SCHAIBLEY, III
BRADLEY MERRILL THOMPSON
Davin A. GIVEN
BAKER & DANIELS
300 North Meridian Street
Suite 2700
Indianapolis, Indiana 46204
(317) 287-0300
Counsel for Petitioner,
Rose Acre Farms, Inc.
WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001
(1)
(2)
(3)
QUESTIONS PRESENTED
Whether a court, reviewing a challenge under the
Administrative Procedure Act to the validity of reg-
ulations that require the destruction of private prop-
erty, should sustain the challenge when the adminis-
trative agency promulgated the regulations based on
the erroneous conclusion that neither the governing
statute nor the Fifth Amendment require compensa-
tion to property owners.
Whether a court should remand regulations to the
administrative agency that promulgated them when
the regulations contain invalid provisions and the
administrative record does not establish that the
agency would have promulgated the other portions
of the regulations without the invalid provisions.
Whether a district court, instead of the United States
Claims Court, has authority to declare contrary to
law an administrative rule against paying statutorily-
required compensation for property destroyed by an
administrative program.
(i)
llama
ii
PARTIES BELOW
The parties to the proceedings below were the peti-
tioner, Rose Acre Farms, Inc. (“Rose Acre”), and the
respondents, Edward Madigan, Secretary of Agriculture
of the United States, Robert Melland, Administrator,
Animal and Plant Health Inspection Service of the United
States Department of Agriculture, and the United States
Department of Agriculture (hereinafter collectively re-
ferred to as the “Secretary’”). Rose Acre was the
plaintiff-appellee below, and the Secretary was defendant-
appellant. Rose Acre is an Indiana corporation engaged
in the production of eggs. Rose Acre has no corporate
parent and no subsidiaries that are not wholly-owned.
ae
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED 20ooooo2ooooooooocccccccececececceeeees i
ESET EE ee ii
py Fs sos y ). y mn iii
TABLE OF AUTHORITIES .200.0....0.....ceecccccccccccceeceeecee Vv
Er a 1
ANTE GEER SE oc ne ee 2
CONSTITUTIONAL PROVISIONS, STATUTES,
AND REGULATIONS INVOLVED ........0.. 2
STATEMENT OF THE CASE ou... .cecccccccceeeee 2
1. The Administrative Proceedings 2
2. The District Court Decision ..........0..0.000000........... 4
8. The Court of Appeals Decision 6
REASONS FOR GRANTING THE WRIT ............... 8
I. THE COURT OF APPEALS IMPROPERLY
RESOLVED FUNDAMENTAL POLICY IS-
8 SOAS SEE ie sae eee 10
A. The Secretary’s Finding that No Emergency
Exists Precludes the Secretary From Order-
ing Destruction of Birds and Eggs ............. 11
1. Subsections 184a(a) and (b) Limit The
Secretary’s Authority to Order Destruc-
NBT ee GINA a A eo 11
2. The Secretary Concluded that SE Does
Not Warrant Destruction Under Subsec-
tions 184a(a) and (b) .......................... 12
B. The Secretary Based His Design of the SE
Regulations on the Assumption that the
Agency Would Not Have to Pay for
Chickens and Eggs Destroyed Under the
eee ara ac 12
eT
iv
TABLE OF CONTENTS—Continued
Page
C. The Court of Appeals Judgment is Contrary
to the Principle Established by this Court
that Agencies, and not Courts, Should Make
Policy Decisions and Scientific Judgments... 14
II. THE PROPER REMEDY FOR THE SECRE-
TARY’S UNLAWFUL RULE AGAINST PAY-
ING COMPENSATION IS TO DECLARE THE
SE REGULATIONS UNLAWFUL IN THEIR
RIE Te acsticanicniineiilinnti udienarctaniianiainemannisiines 16
A. The Better Reasoned Cases Hold that the
Administrative Record must Support Sever-
ability Before a Court May Declare A Regu-
latory Scheme Only Partially Unlawful ........ 17
B. Strong Policy Considerations Demand that
a Court Show Restraint In Severing Por-
SE EEN SITTER 19
III. THE COURT OF APPEALS’ HOLDING
THAT A CHALLENGE TO THE SECRE-
TARY’S RULE AGAINST COMPENSATION
BELONGS IN THE CLAIMS COURT CON-
FLICTS WITH BOWEN v. MASSACHU-
SETTS AND WITH DECISIONS IN’ OTHER
(bi. sg) BREE Ceo et et ag DR Te Cr Ei cet eed OR ee 20
A. The Court of Appeals Decision Is Inconsist-
ent with Bowen and its Progeny .................... 21
1. Bowen v. Massachusetts _.........00000...0000..... 21
2. Decisions by the District of Columbia
I ee I cd 23
B. Rose Acre’s Claim Presents Impertant Fed-
GFA] PYOGOGUPAl TSRUGR ........0ccccccccccescceocecs------. 25
SPA AAT “hecsndivintascbikcimsiblsetinidetnivaiapenpicanahinbaesseniibiiawonss 27
Vv
TABLE OF AUTHORITIES
Cases: Page
Addison v. Holly Hill Fruit Products, 322 U.S. 607
| Rae eT oR Sere TSO n Cy een, eee 18
Atchison T. & S.F. Ry. Co. v. Wichita Board of
Trade, 412 U.S. 800 (1973) ........ Se ree 15
Beverly Hospital v. Bowen, 872 F.2d 483 (D.C.
PRI ae ere enn Cece CLEA LEE BO ST 23
Bowen v. American Hospital Ass’n, 476 U.S. 610
CUNY sdschsstehcschusbcehesinintiiahisiciatedtiiaiamtanmanniana teeta lamest 14
Bowen v. Massachusetts, 487 U.S. 879 (1988) ....... passim
Chevron USA v. Natural Resources Defense Coun-
OUR, FORO; GET Tits GT CIE) nennncncseccatccssecvcncetereces 15
Community For Creative Non-Violence v. Turner,
898 F.2d 1887 (D.C. Cir. 1990) ............................ 19
Esch v. Lyng, 665 F. Supp. 6 (D.D.C. 1987) .......... 24
Esch v. Yuetter, 876 F.2d 976 (1989) .........0000.. 23, 24
Faucher v. Federal Election Commission, 928 F.2d
468 (ist Cir.), cert. denied, 112 S. Ct. 79
Sf ERCR A, SN Pen ee ae PRR NR SNE Es rire Ae 19
Florida Power and Light Co. v. Lorion, 470 U.S.
Se MN aac a a 26
FMC v. Seatrain Lines, Inc., 411 U.S. ‘127 (1973) .. 16
F.P.C. v. Idaho Power Co., 344 U.S. 17 (1952) ...... 18
FTC v. Colgate Palmolive Co., 380 U.S. 374
BSR els rete POR nee Sst ees eon 16
Independent U.S. Tanker Owners Comm. v. Dole,
809 F.2d 847 (D.C. Cir.), cert. denied, 484 U.S.
RU TEIN isductilauicsidetblacnainadaiaimasenthcuidguiecameeente tainee na 15
INS v. Chadha, 462 U.S. 919 (1983) 0000. 20
K-Mart Corp. v. Cartier, 486 U.S. 281 (1988) _...... 18
Loftin v. United States, 6 Cl. Ct. 596 (1984), aff’d,
(i 2 Bit Oi, Sib Ae) eeceeeeen 12
Massachusetts v. HHS, 899 F.2d 53 (1st Cir.
1990), vacated, 111 S. Ct. 2252 (1991) ............ 19
McCullough Gas Processing Corp. v. Department
of Energy, 650 F.2d 1216 (Tem. Em. Ct. App.
IE cashsnp sh taicininictanlaietsell Lanes clasecn ss aut ies ae oe, 18
Monsanto v. Ruckelshaus, 467 U.S. 986 (1984) ....... 13
Motor Vehicle Manufacturers Ass’n v. State Farm
Mutual Automobile Ins. Co., 463 U.S. 29
(| FERRO IE ee Riera PR MRIS Bae EE wna HER Tes eA FI 14
vi
TABLE OF AUTHORITIES—Continued
NLRB v. Brown, 380 U.S. 278 (1965) .................... 16
NLRB v. Enterprise Ass’n, 429 U.S. 507 (1977) ... 19
North Carolina v. F.E.R.C., 730 F.2d 790 (D.C.
Fe BED “sis talsiss san ddeiracciiadenndnredncecncubicleentaianiambakaann 18
Peterson Farms I v. Madigan, 782 F. Supp. 1
ian - GRIT usc Castotnssdicdaaeunndeledeincaataiaiacenmmmnnetine. 24
Sarasota v. EPA, 799 F.2d 674 (11th Cir. 1986).... 23
SEC v. Democratic Senatorial Campaign Commit-
Ss Se Oy SU I ar occe iashaceceenchacsneancnans 16
SEC v. Sloan, 486 U.S. 108 (1978) ........................... 16
Social Security Board v. Nierotko, 327 U.S. 358
{| _: RSNA aE ee Crt ar ste see Reon eRe ee LOA ae 16
Southwestern Electric Power Co. v. FERC, 810
ae ee Cas Sts TINE cebiceceetteerens 15
Vandervelde v. Yeutter, 774 F. Supp. 645 (D.D.C.
|. RRR are tnea ane see Ny rosette n oe Po aN SANDEL Save oem EEN 24
Volkswagenwerk v. FMC, 390 U.S. 261 (1968) ..... 16
Zellous v. Broadhead Associates, 906 F.2d 94 (8rd
RIG. PIII csiccestsicndcenstdiocamadseaumaitcnaaies bebieainamaninaiaate 24
Constitution:
United States Constitution, Fifth Amendment ..2, 7, 12, 13
Statutes:
he 8 a AO ea ene Bese Semen Pes 4
la 2
5A et I icici ccsnndchonnceetonaccshaecdannenalenedeaeneniescamianale 2
ee I en saranda NameOeaES 2, 26
SS 8 a ee en eee ee aes re = 3, 12
Se I 0. ssconiens cccsicdleeenaiaabeiisaamadaemesl passim
Se Ce ED iio ancsscscinsnhcciahetetennicceaneinielenielpanaieioan 2
a oo oS cdaenneaaannianh 4
Be ee I xs: cssaiceicscnsbdanevsnclaeciinneeibanenieeiedanmpensadees 21
FE aS eRe mae ay EES ar = 2
Regulations:
Br ree ee TEI ih iealtnditeniciascoeatstatieadacdcedaamaenimicomaiaedamae 2
OF Ga oii Me IE OD ssicdincicchs aden eieethanaieeiiei tReet 2
Exec. Order No. 12291, 46 Fed. Reg. 13193 (Feb.
i MED cctceebcticecknnideckncauaaaaeeie A 13
vii
TABLE OF AUTHORITIES—Continued
Page
Exec. Order No. 12630, 53 Fed. Reg. 8859 (Mar.
BA, BUI) een nennissnsccicreseceiieneccnnssresveveconnsananssenmensnnncns 12
55 Fed. Reg. 5576 (Feb. 16, 1990) ...........------------------ 2,3
56 Fed. Reg. 3730 (Jan. 30, 1991) ................ 2, 3, 4, 7, 10, 12
Miscellaneous:
Bowman, Bowen v. Massachusetts: The “Money
Damages Exception” to the Administrative Pro-
cedure Act and Grant-in-Aid Litigation, 21 Urb.
Fo et —_ | ane en nee eres 22
Fallon, Claims Court at the Crossroads, 40 Cath.
ime 5. | | Eero arene 22
Noone and Lester, Defining Tucker Act Jurisdic-
tion After Bowen v. Massachusetts, 40 Cath.
3 __, , C nreOT 22
R. Posner, Economic Analysis of Law §3.5
GY iacckicccesitesictsescanaendticieontreisiiatnenintiicetcuieadinavannsuaiites 13
Sisk, Tucker Act Appeals to the Federal Circuit,
36 Fed. B. News & J. 41 (1989) ............ ee AO 22
Sisk, Two Proposals to Clarify the Tucker Act
Jurisdiction of the Claims Court, 37 Fed. Bar
Ree E.G CI accencctescenentiinticenisierncnnnnidawsinannes 22
Webster, Choice of Forum in Claims Litigation,
37 Fed. Bar News & J. 534 (1990) ...................... 22
IN THE
Supreme Court of the United States
OCTOBER TERM, 1991
No.
ROSE ACRE FARMS, INC.,
Petitioner,
v.
EDWARD MADIGAN, SECRETARY OF
AGRICULTURE OF THE UNITED STATES, et al.,
Respondents.
Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Seventh Circuit
PETITION FOR A WRIT OF CERTIORARI
Rose Acre respectfully prays that a writ of certiorari
issue to review the judgment of the United States Court
of Appeals for the Seventh Circuit entered on Febru-
ary 10, 1992.
OPINIONS BELOW
The opinion of the United States Court of Appeals for
the Seventh Circuit is reported at 956 F.2d 670. App.
la-14a. The Court of Appeals’ order denying Rose Acre’s
Petition for Rehearing is reproduced in the Appendix.
App. 50a. The opinion of the United States District
Court for the Southern District of Indiana issued on
June 5, 1991, as amended, is not reported; it is repro-
duced in the Appendix. App. 15a-46a.
2
JURISDICTION
Rose Acre invokes jurisdiction to review the judgment
below pursuant to 28 U.S.C. § 1254(1). The Court of
Appeals entered the judgment reversing the judgment of
the District Court on February 10, 1992. App. la. On
February 26, 1992, the Court of Appeals denied Rose
Acre’s timely Petition for Rehearing. App. 50a. This
petition is timely, having been filed within 90 days of the
date upon which the Court of Appeals denied a timely
Petition for Rehearing.
CONSTITUTIONAL PROVISIONS, STATUTES,
AND REGULATIONS INVOLVED
The pertinent Constitutional provisions (Constitution
of the United States, Fifth Amendment), federal statutes
(5 U.S.C. $$ 702, 704 and 706; 21 U.S.C. § 184a; and
28 U.S.C. § 1491) and regulations (9 C.F.R. §§ 71.3 and
82.30-82.38) are set forth in Appendix D.
STATEMENT OF THE CASE
1. The Administrative Proceedings
On February 16, 1990, the Secretary promulgated an
interim rule restricting the interstate movement of eggs,
chickens and other articles believed by the Secretary to
contain a bacteria called salmonella enteritidis serotype
enteritidis (or “SE”). 55 Fed. Reg. 5576 (codified at
9 C.F.R. §§ 71.3(c) (3) and 82.30-82.36). When ingested
by humans, SE can cause flu-like symptoms, including
diarrhea and vomiting.’ Under the interim regulations,
! The SE bacteria has been found in many different animal species
for many years. 7th Cir. App. 71; 7th Cir. Supp. App. 49. Indeed,
according to the Secretary, “SE is not highly host specific; it
affects many species in addition to chickens. The Salmonella or-
ganism is ubiquitous in the environment, and eradication of the
bacterium is impossible.” 56 Fed. Reg. at 3731. In fact, the Secre-
tary estimates that as many as 50% of broiler chickens are con-
taminated with salmonella. 7th Cir. App. 111-12. But the risk of
3
restricted eggs could be moved interstate only for pasteuri-
zation (a process that results in a heat-treated, liquid
egg product). 55 Fed. Reg. at 5584.
Several comments on the interim regulations asked the
Secretary to authorize indemnity payments for restricted
eggs because of the devastating economic impact of the
restrictions imposed by the regulations. 56 Fed. Reg. at
8731. Other comments requested that the Secretary exer-
cise his authority (a) under 21 U.S.C. § 114a to request
that farmers voluntarily depopulate chickens carrying
the SE bacteria or (b) under 21 U.S.C. § 134a to order
farmers to depopulate such chickens. Id. Action under
either statutory section would have required the Secretary
to pay compensation for the destroyed articles.
After considering the comments on the interim rule,
the Secretary revised the regulations and made them final
on January 30, 1991 (the “SE Regulations”). 56 Fed.
Reg. 3730. The final SE Regulations allow egg producers
to ship- restricted eggs for export, pasteurization and
hardboiling. 56 Fed. Reg. at 3741.
In response to comments, the Secretary issued as part
of the statement of basis and purpose for the final SE
Regulations his decision not to include an indemnity pro-
vision in the regulations. The Secretary explained that,
in his opinion, the regulations do not require depopula-
tion (slaughter) of hens and therefore do not trigger the
indemnity requirement in Section 134a. Id. In addition,
the Secretary concluded that the emergency conditions
that must exist before the Secretary may order destruc-
tion under Section 134a simply do not exist with respect
to SE. The Secretary, therefore, declined to order ex-
plicitly the depopulation of the restricted chickens. /d.
contracting SE from eggs appears to be very low. According to the
Secretary’s expert at trial, there is only one reported outbreak of
SE in humans for every two billion eggs consumed. 7th Cir. App.
98, 110.
a
4
After an extensive discussion of his reasons for rejecting
compensation, the Secretary declared:
For the reasons stated above, APHIS does not in-
tend to authorize payments of claims for chickens
voluntarily destroyed, to order mandatory depopula-
tion of infected chicken flocks and pay indemnities
to the owners of destroyed chickens, or to make in-
demnity payments for eggs sold for pasteurization.
56 Fed. Reg. at 3731-32.
2. The District Court Decision
In the fall of 1990, the Secretary imposed restrictions
under the SE Regulations on three farms owned by peti-
tioner Rose Acre.? On December 28, 1990, Rose Acre filed
an action in the United States District Court for the
Southern District of Indiana, seeking a judicial declara-
tion that the SE Regulations are invalid and an injunc-
tion against enforcement of the SE Regulations.*
Rose Acre brought the action for one reason: to pre-
vent further irreparable harm to Rose Acre. Rose Acre
argued that the regulations are invalid on several grounds,
including lack of Due Process, violation of the require-
ment of notice and comment rulemaking under the Ad-
ministrative Procedure Act (APA) (5 U.S.C. § 553), and
lack of statutory authority. Rose Acre also claimed, and
the District Court held, that the Secretary effectively or-
dered the destruction of chickens and eggs through the
SE Regulations without declaring the statutorily required
emergency. Rose Acre demonstrated that the restrictions
2 Rose Acre challenged the regulations because they were not
rationally related to protecting human health. In fact, testimony
from Rose Acre employees demonstrated that during the months
between the time of the outbreaks allegedly linked to Rose Acre and
the time that the Secretary imposed the restrictions, Rose Acre sold
218 million eggs from the implicated farms without further inci-
dent. 7th Cir. Supp. 29-31.
3 The District Court had jurisdiction pursuant to 28 U.S.C. § 1331.
5
forced Rose Acre to sell its eggs at substantially below
cost. The District Court concluded that the Secretary
was attempting to circumvent 21 U.S.C. § 184a by im-
posing restrictions that were tantamount to an order of
destruction, even though the administrative record estab-
lished that conditions did not warrant mandatory de-
struction,® explaining:
USDA is basically withholding a declaration of an
emergency while imposing restrictions as if it had
declared an emergency. By labelling certain houses
“test” and “infected” [and imposing restrictions on
the associated chickens and eggs], USDA effectively
condemns the eggs produced in those houses to be
sold at less than cost. Chickens are destroyed in the
testing process, and are destroyed as to their eco-
nomic value when they are part of a house labelled
“infected.” As Rose Acre asserts, if USDA effec-
tively orders the destruction of animals by eliminat-
ing their economic value, it cannot avoid the obliga-
tion to compensate owners by claiming that there is
no “extraordinary emergency.”
App. 45a.
4 The unrebutted evidence at trial demonstrated that, from Octo-
ber 1, 1990, through March 31, 1991, the average market price for
shell eggs was 68 cents per dozen, Rose Acre’s average production
costs were 48 cents per dozen, and the average price Rose Acre re-
ceived for its restricted eggs was 43 cents per dozen. 7th Cir. Supp.
App. 32-34; 7th Cir. App. 50-51. The price is low because the
pasteurization market is a salvage market for eggs that cannot be
sold for human consumption as table eggs and because when
pasteurization facilities know that a producer like Rose Acre must
sell its eggs in the pasteurization market, the pasteurizers offer a
price below the prevailing price for pasteurization eggs. 7th Cir.
Supp. App. 86, 105. Moreover, many pasteurizers will not buy Rose
Acre’s restricted eggs at all because many food retailers refuse to
buy pasteurized eggs made from restricted eggs, even though the
Secretary believes such eggs to be safe. 7th Cir. Supp. App. 24-25,
133-34.
5 The Secretary’s own expert testified at trial that the only way
out of the restrictions imposed under the SE Regulations is to
depopulate the flock. 7th Cir. App. 115; see also 7th Cir. Supp. App.
135.
6
The District Court held that the agency’s decision
not to pay compensation under the SE Regulations is
contrary to law. After a thorough analysis of the case
law, the District Court found that the Secretary’s declara-
tion that he would not amend the regulations to include a
compensation provision constituted a rule for purposes of
judicial review. The District Court alse found from its
review of the administrative record that “|t]he record
indicates that the agency may not have established such
a scheme if it had also had to plan on indemnifying the
flock owners.” App. 45a. The court concluded that the
Secretary’s rule of no indemnification is bound up in-
extricably with the other substantive provisions of the SE
Regulations, On the basis of this analysis of severability,
the District Court declared the SE Regulations invalid
in their entirety and enjoined the Secretary from enforc-
ing the regulations against Rose Acre.
3. The Court of Appeals’ Decision
The Secretary appealed the District Court’s decision.
On appeal, the Secretary did not challenge the District
Court’s analysis or its conclusion that the Secretary’s
declaration of no indemnification constituted a rule for
purposes of judicial review. Nor did the Secretary dispute
the District Court’s conclusion that the agency might not
have established a regulatory scheme requiring the de-
struction of birds and eggs if the Secretary had believed
that the agency is required bv statute to provide com-
pensation to affected flock owners. Rather,.the Secretary
argued principally that the District Court lacked juris-
diction to hear Rose Acre’s claim and that the SE Regula-
tions are not tantamount to an order of destruction.
The Court of Appeals reversed the District Court’s
judgment. Although the Court of Appeals rejected the
Secretary’s jurisdictional argument, the court declined to
address the Secretary’s second argument because the
court concluded that the District Court’s remedy was
7
improper.* The Court of Appeals acknowledged that be-
fore issuing the regulations, “the Secretary concluded that
neither the Constitution nor a statute requires compensa-
tion.” App. 4a (citing 56 Fed. Reg. at 3731-32). But the
Court of Appeals also opined that if, contrary to the Sec-
retary’s conclusion in promulgating the regulation, either
Section 134a or the Constitution in fact requires compen-
sation, the “right way to proceed” is for a court to order
payment, and not to enjoin the Secretary from enforcing
the SE Regulations. Jd. at 5a. In the Court of Appeals’
view, if the Constitution or statute requires compensa-
tion, “then setting aside the regulation is the wrong rem-
edy. Compensation is the right one.” Jd. at 6a.
The Court of Appeals dismissed as a “litigating posi-
tion” the Secretary’s response to comments in which he
announced his decision not to revise the SE Regulations
to provide for compensation. Id. at 7a. The Court of
Appeals reasoned that whether the Secretary is right or
wrong with respect to his conclusion that neither the
Fifth Amendment nor the statute requires compensation,
“Telither way, it is inappropriate to halt the regulatory
program.” Id. at 7a. The Court of Appeals concluded
that even if the District Court were correct and the Sec-
retary’s decision not to pay compensation is a rule with
the force of law, “the appropriate remedy is to excise the
offending text, and the appropriate surgeon is the claims
court.” Id. at 7a. The Court of Appeals then stated, “It
is to the claims court that Congress has entrusted the task
of determining whether a statute or the Constitution
requires compensation. It is to the claims court that Rose
Acre must go.” Id. at 8a. .
The Court of Appeals did not address the District
Court’s analysis of severability or the District Court’s
¢ The Court of Appeals, nonetheless, suggested that the Secretary
was wrong in limiting his interpretation of the word “destroyed”
to the literal, physical annihilation of the eggs and chickens. See
App. 4a.
8
finding that the Secretary might not have promulgated
the challenged regulations if the Secretary had correctly
understood that compensation is a statutorily required ele-
ment of such a program. The Court of Appeals then re-
jected Rose Acre’s other challenges to the regulations, in-
cluding its claim that the regulations are not rationally
related to disease control. In doing so, the Court of Ap-
peals criticized the District Court for conducting any
hearing at all, and repeatedly invoked the principle of def-
erence to administrative agency determinations. F.g., Id.
at 9a (“Congress called for the judgment of the Secre-
tary, not the judgment of a court, on the appropriate re-
sponse to diseases carried by animals.’’).
REASONS FOR GRANTING THE WRIT
This case presents an interesting vehicle for the Court
to clarify the appropriate role of courts in reviewing ad-
ministrative agency actions. Courts routinely struggle
with determining urder what circumstances a regula-
tion should be declared unlawful as not supported by the
record. While the dogma is clear that policy decisions and
scientific judgments are for regulators to formulate, this
case illustrates how courts can make fundamental policy
decisions under the guise of legal analysis, while at the
same time paying lip service to deference to administra-
tive decision-making.
At the outset of the agency’s consideration of the regu-
lations at issue, the Secretary conducted a cost/benefit
analysis. Such analysis goes to the very heart of policy-
making and the administrative function. After reviewing
-policy options that included an expensive proposal from
the United States Food and Drug Administration to test
all egg-laying chicken flocks for SE, the Secretary de-
signed a regulatory scheme that, in the opinion of the
Secretary, would not require the expenditure of increas-
ingly scarce public funds to indemnify owners whose
flocks are restricted under the regulations. After holding
that the Secretary’s conclusion that he did not have to
9
pay compensation as a part of the regulations was con-
trary to law, the District Court reviewed the administra-
tive record and concluded that the Secretary might not
have implemented the regulatory scheme if he had known
that compensation is required. As a result, the District
Court invalidated the regulations, sending the matter
back to the agency to decide whether to proceed with the
regulatory scheme, even if the government has to pay
for the chickens and eggs destroyed under its provisions.
The Court of Appeals, on the other hand, emphatically
believed that there was a “right” legal answer to this
quintessential policy question. In the Court of Appeals’
opinion, it would be “inappropriate to halt the regulatory
program” simply because public funds, rather than pri-
vate funds, would have to be used to pay for the destruc-
tion resulting from the program. But the Secretary never
made the decision to go forward with the regulations on
that basis. Sound principles of judicial review of admin-
istrative decision-making require that judges not make
such decisions. However, the Court of Appeals did just
that, in so doing, misconceived the nature of its role in
reviewing the regulations at issue. Reconciling the con-
flicting policies involved and making the kinds of cost/
benefit analyses that a regulator must make in allocating
scarce public resources are not judicial functions.
This case also merits review to address the appropriate
methodology a reviewing court should employ when con-
fronted with a regulation containing an invalid provision.
The Court of Appeals proceeded on the premise that if a
portion of the regulations were invalid, the invalid provi-
sion could simply be excised even though the administra-
tive record indicated that the regulatory scheme was
based on the invalid provision. That proposition is
squarely at odds with the decisions of this Court and at
least one other court of appeals. This Court should take
the opportunity to clarify the rules with respect to judicial
severance of a portion of a regulation when the issue was
not explicitly addressed by the administrative agency.
4
]
1
10
The decision below also presents the recurring issue of
general importance of whether a district court has juris-
diction to declare a rule against compensation unlawful.
The Court of Appeals apparently concluded that, because
declaring unlawful the Secretary’s rule against compen-
sation might ultimately lead to the payment of money, the
Claims Court should hear the challenge. That decision
conflicts with this Court’s decision in Bowen v. Massa-
chusetts, 487 U.S. 879 (1988), and the decisions of the
Courts of Appeals for the District of Columbia and Third
Circuits.
I. THE COURT OF APPEALS IMPROPERLY RE-
SOLVED FUNDAMENTAL POLICY ISSUES
The District Court identified two independent deficien-
cies in the administrative record for the SE Regulations.
First, the SE Regulations are unlawful under 21 U.S.C.
§ 134a(a) and (b) because the regulations, in effect, order
destruction of chickens and eggs even though the Secre-
tary did not declare a state of emergency as required by
Section 134a as a prerequisite to such an order of de-
struction. Second, the District Court held that the SE
Regulations are unlawful because the Secretary based the
design of the regulations on the erroneous assumption
that the agency would not have to pay compensation to
the flock owners.
The Court of Appeals’ opinion is predicated on an
alarmist characterization of the risks of salmonella.’
App. la-2a. But the court’s rhetoric about a public health
emergency is unsupported—the Secretary’s record ex-
plicitly rejects that characterization. 56 Fed. Reg. at
3731. In reversing the District Court, the Court of Ap-
peals usurped the Secretary’s administrative function
(a) by disregarding the Secretary’s position expressed in
the administrative record that conditions do not warrant
destruction of birds and eggs and (b) by deciding that
it would be “inappropriate to halt the regulatory pro-
7 But see notes 1 and 2 supra.
11
gram” if the agency must pay for the destruction result-
ing from the program, without allowing the agency to
decide whether to halt or modify the program.
A. The Secretary’s Finding that No Emergency Exists
Precludes the Secretary From Ordering Destruc-
tion of Birds and Eggs
As the evidence at trial conclusively demonstrated and
as the District Court held, the SE Regulations effectively
destroy the economic value of the restricted chickens and
eggs. App. 44a-45a; Appellee’s Brief at 22-25. The Court
of Appeals observed, without deciding the issue, that
“laln ‘alternative’ that is less attractive financially than
slaughter is the functional equivalent of a command to
destroy the animals.” App. 4a. The destruction ordered
by the Secretary under the SE Regulations brings the
regulations within the scope of 21 U.S.C. § 134a, which
authorizes the Secretary to order destruction of animals
and animal products only if certain emergency conditions
exist. The Secretary, however, took the arbitrary position
that the SE Regulations are not tantamount to an order
of destruction and declared that emergency conditions do
not exist with respect to SE.
1. Subsections 134a(a) and (6b) Limit The Secre-
tary’s Authority to Order Destruction
Under subsections (a) and (b) of § 134a, the Secre-
tary may order destruction of animals or animal prod-
ucts only if certain conditions exist. Under subsection
134a(a), the Secretary must find that destruction is nec-
essary to prevent the interstate spread of a communcable
disease and that the animals meet one of three additional
criteria. Under the first criterion, the Secretary must
find, among other findings, that the animals were han-
dled contrary to a statute or regulation. Under the sec-
ond and third criteria, the Secretary must find, inter
alia, that the animals to be destroyed are moving, or have
moved, interstate and are affected with, or were exposed
to, “any communicable disease dangerous to livestock or
poultry.” Under subsection 134a(b), the Secretary must
12
find both the existence of an “extraordinary emergency”
and that the states have responded inadequately to the
emergency. These requirements of section 134a define the
limited instances in which the Secretary may abandon
the cooperative procedures of 21 U.S.C. § 114a to order
destruction. Loftin v. United States, 6 Cl. Ct. 596 (1984),
aff'd, 765 F.2d 1117 (Fed. Cir. 1985).
2. The Secretary Concluded that SE Does Not
Warrant Destruction Under Subsections 134a(a)
and (b)
In no uncertain terms, the Secretary concluded that
circumstances justifying mandatory destruction of chick-
ens and eggs under 21 U.S.C. §1384a(a) and (b) are
not present in the case of SE. 56 Fed. Reg. at 37381.
Although, according to the Secretary, SE does not justify
destruction of birds and eggs under the standards of
subsections 184a(a) and (b), the Secretary nonetheless
promulgated the SE Regulatons because he arbitrarily
contended that the restrictions imposed by the SE Regu-
lations are not tantamount to an order of destruction
under Section 134a. The Secretary concluded that SE
does not need to meet the requirements of subsections
134a(a) and (b) for him to impose the restrictions con-
tained in the SE Regulations. As the District Court cor-
rectly held, the Secretary’s actions were arbitrary and
contrary to law.
ne
B. The Secretary Based His Design of the ‘SE Regula-
tions on the Assumption that the Agency Would
Not Have to Pay for Chickens and Eggs Destroyed
Under the Regulation
in designing the SE Regulations, the Secretary was
required to and did analyze the cost of the proposed
regulations.* The Secretary’s proper goal was to obtain
8 Administrative agencies are required by executive order to con-
sider whether their regulatory initiatives will result in a Fifth
Amendment taking, thereby requiring compensation. Executive Or-
der No. 12630 (March 15, 1988), 53 Fed. Reg. 8859 (March 18,
1988). A second executive order requires that each agency analyze
eal )
13
maximum benefits from his available enforcement dollars.
While the District Court deferred to the Secretary’s eval-
uation of the benefits of the SE Regulations, the District
Court held that (1) the Secretary erroneously concluded
that compensation was not due® and (2) the Secretary’s
error materially affected his design of the regulations.
App. 45a. The District Court thus declared the regula-
tions unlawful, forcing the Secretary to reconsider them
in light of their true cost to the Treasury.’
Ignoring the administrative law issues, the Court of
Appeals simply observed that the Fifth Amendment and
21 U.S.C. § 134a(d) do not require compensation as a
prerequisite to a taking. That observation sidesteps the
real issue and overlooks the operative subsections of the
Statute (te., 21 U.S.C. §184a(a) and (b)). The Court
of Appeals sustained the validity of the regulation despite
the fact that the Secretary’s decision to impose the re-
strictions was based on a material error of law.’ The
the costs and benefits of its regulations. Executive Order No. 12291,
Feb. 17, 1981, 46 Fed. Reg. 13193 (Feb. 19, 1981).
® The District Court held that the Secretary must pay compensa-
tion under both 21 U.S.C. § 134a and the Fifth Amendment to the
Constitution of the United States.
1° The Court of Appeals’ decision runs counter to one of the pur-
poses of the Fifth Amendment and Section 134a. In addition to
ensuring just compensation, the Fifth Amendment and Section 134a
operate as moderating forces on government takings by internalizing
the cost of such takings. See R. Posner, Economic Analysis of Law
§ 3.5 (1977). If an agency is allowed to effect takings on the mis-
taken belief that compensation is not due, that function is lost.
! Relying on such cases as Monsanto v. Ruckelshaus, 467 U.S. 986
(1984), the Court of Appeals adopted the same approach as a court
would use in determining whether a statutory taking contravenes
the Fifth Amendment to the United States Constitution. But ad-
ministrative agencies, unlike Congress, must provide an adequate
statement of basis and purpose for their legislative enactments. A
court must be able to review that statement of basis and purpose to
make sure that the agency had a rational basis for its legislative
rule. Because the Secretary did not believe that the restrictions
14
remedy for that deficiency is not compensation; the rem-
edy to which Rose Acre is entitled under the APA is a
declaration that the regulation is contrary to law and a
remand to the Secretary to design a regulation that is
consistent with the statute and the Constitution.
Thus far, the Secretary’s key policy decision is that the
various costs necessary to obtain the benefits of the
regulations are justified 7f Rose Acre and the other egg .
producers are the entities that must pay those costs. The
Secretary has not decided that the same program would
be adopted if, contrary to the regulations, the United
States Treasury must pay the costs of his regulatory
scheme. The Court of Appeals may not make (and should
not have made) that policy decision for him.
C. The Court of Appeals Judgment is Contrary to the
Principle Established by this Court that Agencies,
and not Courts, Should Make Policy Decisions and
Scientific Judgments
In reversing the District Court’s entry of a declaratory
judgment, the Court of Appeals did not properly apply
the principle that a regulation must be supported by
the administrative record. Bowen v. American Hospital
Ass’n, 476 U.S. 610, 626-27 (1986) ; Motor Vehicle Manu-
facturers Ass’n v. State Farm Mutual Automobile Ins.
Co., 463 U.S. 29, 43-50 (1983). As the District Court
held, the SE Regulations are not supported by the record
because, among other things, the Secretary explicitly
found that the statutorily required emergency conditions
do not exist. App. 44a-45a. Indeed, as a result of the
Secretary’s mistaken interpretation of the scope of sec-
tion 134a, the Secretary himself explicitly found that
circumstances do not warrant mandatory destruction.
would require him to pay compensation, the Secretary obviously
did not explain why the SE program is worth the resources neces-
sary to compensate flock owners, and in the absence of that reason-
ing, the Court of Appeals may not make that policy decision for the
Secretary.
15
The District Court also held that the regulations were
based on the erroneous assumption that the agency would
not have to pay compensation. If the Secretary wants
to change his mind about the propriety of mandatory
destruction in the case of SE (with the attendant obliga-
tion to pay compensation), he must explain in a state-
ment of basis and purpose how SE now meets the re-
quirements of subsections 134a(a) and (b) and why the
restrictions are worth the cost to the agency. Atchison
T. & S.F. Ry. Co. v. Wichita Board of Trade, 412 U.S.
800, 807-808 (1973); Southwestern Electric Power Co.
v. FERC, 810 F.2d 289, 290 (D.C. Cir. 1987) ; Independ-
ent U.S. Tanker Owners Comm. v. Dole, 809 F.2d 847,
852 (D.C. Cir.), cert. denied, 484 U.S. 819 (1987).
The Court of Appeals was not free to make those deter-
minations; the Secretary must make them. Chevron USA
v. Natural Resources Defense Council, Inc., 467 U.S. 837,
866 (1984) (‘“[F]Jederal judges—who have no constitu-
ency—have a duty to respect legitimate policy choices
made by those who do. The responsibilities for assessing
the wisdom of such policy choices and resolving the strug-
gle between competing views of the public interest are not
judicial ones: ‘Our Constitution vests such responsibilities
in the political branches,’” (citation omitted). In this -
respect, the decision below does not represent merely an
incorrect application of well-settled principles of law to
the facts of a particular case. Rather, this case, properly
analyzed, will demonstrate to the lower courts that
Chevron is not a direction to rubber-stamp administra-
tive determinations, but instead requires the art of judg-
ing to differentiate the decisions properly reserved to
judges from policy questions that should De resolved by
administrators.
The Court of Appeals took the position that the alleged
inconsistency between the statutory mandate (which re-
quires compensation) and the regulations purportedly
promulgated to implement that statutory mandate (which
do not provide compensation) does not present an obsta-
16
cle to implementation of the program. App. 6a-7a. This
rather extraordinary position resulted from the Court of
Appeals’ fundamental policy choice that the program
should proceed even if the agency must bear the cost.
Chevron, however, above all emphasizes that the role of
the reviewing court is to ensure that regulations are
consistent with a clearly expressed statutory mandate.
When that mandate delegates decision-making authority,
Chevron mandates deference to reasonable policy choices
that fill gaps left by Congress; when the mandate requires
that a program be designed to contain certain features
(e.g., requiring compensation), it is the duty of the court
to ensure that the administrator promulgates regulations
that incorporate those features.
The courts must police the boundaries between legiti-
mate administrative policy-making and administrative
expedience. When an agency deviates from the statutory
language that provides direction to the administrator in
promulgating regulations, the proper remedy is to invali-
date the regulatory scheme.”
II. THE PROPER REMEDY FOR THE SECRETARY’S
UNLAWFUL RULE AGAINST PAYING COMPEN-
SATION IS TO DECLARE THE SE REGULATIONS
UNLAWFUL IN THEIR ENTIRETY
This case also involves the recurring question of the
appropriate judicial response when confronted with a
regulatory scheme containing an invalid provision. The
District Court correctly held that the rule against com-
12 The courts remain the final authorities on issues of statutory
construction and hence should not rubber-stamp administrative con-
structions and provisions that are inconsistent with the plain lan-
guage of the statute or the statutory mandate or that defeat the
obvious purpose that Congresss specifically sought to implement.
SEC v. Democratic Senatorial Campaign Committee, 454 U.S. 27,
32 (1981); SEC v. Sloan, 436 U.S. 103, 117-18 (1978); FMC v.
Seatrain Lines, Inc., 411 U.S. 726, 745-46 (1973); Volkswagenwer!:
v. FMC, 390 U.S. 261, 272 (1968); NLRB v. Brown, 380 U.S. 278,
291 (1965) ; FTC v. Colgate Palmolive Co., 380 U.S. 374, 385 (1965) ;
Social Security Board v. Nierotko, 327 U.S. 358, 369 (1946).
17
pensation is inextricably bound to the other substantive
provisions of the SE Regulations. App. 45a. The Court
of Appeals held that if the Secretary’s statement consti-
tutes a rule,’ the Claims Court could declare that rule
unlawful and excise it from the rest of the SE Regula-
tions. App. 7a. That holding is inconsistent with prior
decisions of this Court and creates a conflict among the
circuits on this fundamental question of judicial review
of administrative agency action. The issue merits further
analysis by this Court to provide principles to guide the
lower courts on this important issue.
A. The Better Reasoned Cases Hold that the Admin-
istrative Record Must Support Severability Before
a Court May Declare A Regulatory Scheme Only
Partially Unlawful
In holding that the Claims Court could provide com-
plete relief, the Court of Appeals failed to apply the
proper test for deciding whether the Claims Court could
sever the non-indemnification rule from the rest of the
SE Regulations. The decision below asserts that the
remedy for an invalid regulatory provision is simply to
“excise” it, App. 7a, notwithstanding the uncontested
District Court finding that the agency might not have
adopted the regulations if the agency understood that
public funds were required to compensate egg producers.
The Court of Appeals apparently accepted the Secretary’s
13In Parts II and III of this Petition, petitioner assumes that
the District Court correctly held that the Secretary’s statement
that the agency will not pay compensation constitues a rule. Be-
cause (1) the District Court went through exhaustive analysis in
reaching its conclusion, (2) the Secretary did not challenge that
conclusion on appeal and (3) the Court of Appeals merely rejected
the District Court’s analysis and authority without any analysis or
authority of its own (App. 7a), Rose Acre need not spend much
time on that issue here. The Secretary’s statemeni that he would
pay no indemnification came in the statement of basis for the SE
Regulations, in response to several comments requesting that the
Secretary revise the SE Regulations to include a compensation
provision. Rose Acre is challenging the SE Regulations as a whole,
including the lack of an indemnity provision in those regulations.
18
argument that, “the regulation . . . should be treated as
severable unless: (1) there are affirmative indications of
a contrary agency intent; or (2) severing the defective
provision would impair the functioning of the underlying
statute. K-Mart Corp. v. Cartier, 486 U.S. 281, 294
(1988).” Appellants’ Brief at 47. But that statement
of the law is incorrect. Although the discussion of this
point in K-Mart is subject to different interpretations,"
it should not be read to hold that there is a presumption
that a court may sever a portion of a regulation unless
the agency has expressed an “affirmative” indication that
the agency intended the rules to be inseparable. Quite
the contrary, this Court has held (when analyzing this
issue in more depth than in K-Mart) that a court may
not sever a portion of a regulation from the rest of a
regulatory scheme unless the record establishes that the
agency would have promulgated the lawful portions of the
reglation even without the unlawful portions. F.P.C. v.
Idaho Power Co., 344 U.S. 17, 20-21 (1952); Addison
v. Holly Hiil Fruit Products, Inc., 322 U.S. 607, 618-19
(1944).
The better reasoned decisions of courts of appeals are
diametrically opposed to the decision of the Seventh Cir-
cuit on this issue. In North Carolina v. F.E.R.C., 730
F.2d 790, 796 (D.C. Cir. 1984), Judge (now Justice)
Sealia wrote: “Where there is substantial doubt that the
agency would have adopted the same disposition regard-
ing the unchallenged portion if the challenged portion
were subtracted, partial affirmance is improper.” Indeed,
for a court to sever a regulation under any other circum-
stance would be to invade the policy-making province of
the agency. McCullough Gas Processing Corp. v. Depart-
ment of Energy, 650 F.2d 1216, 1229-30 (Tem. Em. Ct.
App. 1981). As with any instance in which a court corrects
14 The Court in K-Mart severed a portion of a regulation after
observing that “[t]he severance and invalidation of this subsection
will not impair the function of the statute as a whole, and there is
no indication that the regulation would not have been passed but for
its inclusion.” 486 U.S. at 294. ‘
19
an agency’s error of law, if there is any question as to
whether the agency would have proceeded with the reg-
ulation, the proper procedure is to remand the case to the
agency. See NLRB v. Enterprise Ass’n, 429 U.S. 507, 522
n.9 (1977) (“When an administrative agency has made
an error of law, the duty of the Court is to ‘correct the
error of law committed by that body, and, after doing so,
to remand the case to the [agency] so as to afford it the
opportunity of examining the evidence and finding the
facts as required by law.’”’) (citation omitted). That is
critical here because it is clear that the Secretary based
the design of the SE Regulations on the assumption that
he would not have to pay compensation.” After reviewing
the administrative record, the District Court correctly
held that there is substantial doubt that the Secretary
would have adopted the regulatory scheme had he known
that the government would have to pay compensation.'®
B. Strong Policy Considerations Demand that a Court
Show Restraint In Severing Portions of a Regula-
tion
The test developed for determining the severability of
statutory provisions is not the appropriate test for deter-
mining the severability of regulatory provisions. Unfor-
tunately, a number of decisions employ the wrong test.
E..g., Faucher v. Federal Election Commission, 928 F.2d
468, 472 (1st Cir.), cert. denied, 112 S. Ct. 79 (1991);
Massachusetts v. HHS, 899 F.2d 58, 76 (1st Cir. 1990),
vacated on other grounds, 111 S. Ct. 2252 (1991) ; Com-
munity For Creative Non-Violence v. Turner, 893 F.2d
1387, 13894 (D.C. Cir. 1990). The guiding principle in
15 See Part I, supra.
16 The ultimate question for this Court is the same whether or
not the Secretary’s statement denying compensation in the preamble
to the final SE Regulations constitutes a formal rule. In either case,
the test is whether the record evidences the Secretary’s intent to
proceed with the SE Regulations in their present form even if he
has to pay for the birds and eggs destroyed under those regulations.
As explained above, it does not.
20
both cases is the intent of the enacting body, but there
is a significant difference in the appropriate analysis.
The necessity of an administrative record, including an
adequate statement of basis and purpose, and a district
court’s power to remand a case to an agency for further
proceedings, make a court’s role more limited in the case
of a regulation."
Congress has required that agencies provide an ade-
quate statement of basis and purpose for regulations.
Therefore, when a court holds only a portion of a regula-
tion invalid, it should be clear from the administrative
record that the agency would have promulgated the re-
maining portions without the invalid portion. As with any
regulation, the administrative record must support the
remaining portions of the regulation. If there is am-
biguity, the court should remand the case to the agency for
further proceedings. The Court should take this oppor-
tunity to clarify the proper role for a court when fashion-
ing a remedy for a regulation containing an invalid
provision.
Ill. THE COURT OF APPEALS’ HOLDING THAT A
CHALLENGE TO THE SECRETARY’S RULE
AGAINST COMPENSATION BELONGS IN THE
CLAIMS COURT CONFLICTS WITH BOWEN v.
MASSACHUSETTS AND WITH DECISIONS IN
OTHER CIRCUITS
The final issue presents an opportunity for the Court
to define further a district court’s jurisdiction to declare
contrary to law an agency’s rule against payment of
money. The Court of Appeals concluded that Rose Acre’s
challenge to the SE Regulations was within the District
17 In contrast, a statutory provision is presumed severable if what
remains after severance is fully operative as law. INS v. Chadha,
462 U.S. 919, 934 (1983). Because the Constitution obviously does
not require that Congress develop anything like an administrative
record for its statutes, when a court decides whether to sever a
portion of a statute, the court is not confronted with the question
whether a record adequately supports the remaining portion of the
statute. Moreover, courts may not remand statutes to Congress for
further development of a record.
21
Court’s jurisdiction. But after ruling that the Secretary’s
denial of compensation did not justify invalidating the SE
Regulations in their entirety, the Court of Appeals further
held that the Claims Court, and not the District Court,
should hear Rose Acre’s challenge to the Secretary’s rule
denying compensation.’* The Court of Appeals’ refusal
to affirm even the portion of the District Court’s judg-
ment invalidating the Secretary’s non-indemnification rule
is squarely at odds with this Court’s decision in Bowen.
In this respect, it presents important recurring issues
affecting a district court’s jurisdiction resolved incon-
sistently by the courts of appeals.”
A. The Court of Appeals’ Decision Is Inconsistent with
Bowen and its Progeny
1. Bowen v. Massachusetts
The Claims Court has jurisdiction under the Tucker
Act (28 U.S.C. § 1346) to hear claims for money dam-
ages over $10,000 against the United States and predi-
-eated on a constitutional provision, statute or regulation,
among other things. Bowen, 487 U.S. at 910 n.48. Ap-
parently relying on the Tucker Act, the Court of Appeals
concluded that a challenge to the Secretary’s rule against
paying compensation belongs in the Claims Court. The
reasoning of Bowen, however, explains why the District
18 Rose Acre filed a complaint in the United States Claims Court
on May 5, 1992. That fact does not affect the merits of this peti-
tion because a favorable decision in the Claims Court will not
render this case moot. The Claims Court cannot invalidate the SE
Regulations and protect Rose Acre from further irreparable injury.
19 This case presents important substantive issues as well. As
the Secretary promulgates regulations in the future, he should have
clear guidance regarding the circumstances under which he must
compensate farmers for restrictions on movement and sales of
animals and animal products. Restrictions such as those imposed
under the SE Regulations can have a dramatic impact on farmers.
For example, in the five months before trial, the Secretary required
Rose Acre to divert 180 million eggs worth $10.2 million. 7th Cir.
Supp. App. 32-33.
22
Court, not the Claims Court, had authority to declare the
rule unlawful.
In Bowen, this Court addressed the question whether
the Commonwealth of Massachusetts could challenge in a
district court the decision of the Secretary of Health and
Human Services to deny reimbursement for a particular
program under Medicaid. The Court held that because the
Commonwealth sought relief prospective in its effect and
because the Claims Court could not provide an adequate
remedy, the district court could properly consider the
Commonwea!lth’s claim.”
Like the plaintiff in Bowen, Rose Acre, as a part of
its challenge to the validity of the SE Regulations, chal-
lenged the Secretary’s rule denying indemnity. Also like
the plaintiff in Bowen, Rose Acre sought declaratory re-
lief as to the prospective operation of a rule, not a deter-
mination regarding any sum certain of money due Rose
Acre for past injury. In this case, the District Court
clearly had jurisdiction under Bowen to declare unlawful
the rule against indemnification. And here, as in Bowen,
“the doubtful and limited relief available in the Claims
Court is not an adequate substitute for review in the Dis-
trict Court.”” Bowen, 487 U.S. at 901.
Indeed, the Court of Appeals’ decision relegates Rose
Acre to a manifestly inappropriate forum that lacks the
basic authority to adjudicate the prospective challenges
20 Although the Court of Appeals’ decision in this case is clearly
inconsistent with this Court’s decision in Bowen, several commenta-
tors have suggested that the jurisdiction of the Claims Court under
Bowen is quite confusing. Fallon, Claims Court at the Crossroads,
40 Cath. U. L. Rev. 571 (1991); Noone and Lester, Defining Tucker
Act Jurisdiction After Bowen v. Massachusetts, 40 Cath. U.L. Rev.
571 (1991); Sisk, Two Proposals to Clarify the Tucker Act Juris-
diction of the Claims Court, 37 Fed. Bar News & J. 47 (1990);
Webster, Choice of Forum in Claims Litigation, 37 Fed. Bar News
& J. 534 (1990); Bowman, Bowen v. Massachusetts: The “Money
Damages Exception” to the Administrative Procedure Act and
Grant-in-Aid Litigation, 21 Urb. Law. 557 (1989); Sisk, Tucker
Act Appeals to the Federal Circuit, 36 Fed. B. News & J. 41 (1989).
23
that Rose Acre has advanced and to fashion appropriate
equitable relief. As this Court explained in Bowen:
The Claims Court does not have the general equitable
powers of a district court to grant prospective re-
lief, Indeed, we have stated categorically that “the
Court of Claims has no power to grant equitable
relief.”
Bowen, 487 U.S. at 905 (footnote and citation omitted).
2. Decisions by the District of Columbia and Third
Circuits
Because other circuit courts of appeals have followed
Bowen, the Court of Appeals’ decision in this case creates
a conflict among the circuits. The District of Columbia
and the Third Circuits have confronted the question
whether a district court has jurisdiction to hear a pro-
spective challenge to an administrative determination that
no compensation is due under a statute, and both cir-
cuits have held that a district court is the proper forum.”
In Esch v. Yuetter, 876 F.2d 976 (1989), the District
of Columbia Circuit held that a district court could hear
a challenge to the denial of benefits by the Secretary of
ad
Agriculture under two federal farm subsidy programs.”
21 Although it is a pre-Bowen case, the decision in Sarasota v.
EPA, 799 F.2d 674 (11th Cir. 1986), follows the rationale of Bowen
in holding that a challenge to the criteria for determining grant
awards under the Federal Clean Water Act was properly considered
by the district court, and not the Claims Court.
22 The District of Columbia Circuit considered another challenge
to a regulation denying compensation in Beverly Hospital v. Bowen,
872 F.2d 483 (D.C. Cir. 1989). There, several hospitals brought an
action challenging a regulation of the Secretary of Health and
‘duman Services (“HHS”) that deny compensation under Medicaid
for copying costs related to patient records. The district court found
the regulation unlawful under the Medicaid statute. The question
presented in that case was not whether the court could hear the
challenge, but whether the court should go one step further and
order HHS to pay money for copying costs previously incurred by
the hospitals. Interpreting this Court’s decision in Bowen, the
court of appeals held that the district court should ensure that HHS
paid compensation for copying costs previously incurred.
24
The plaintiffs in Esch contested the Secretary’s determi-
nation that they qualified as only one- and two-person
farms for certain price support and set-aside programs,
respectively, rather than as a nine-person farm. Esch,
876 F.2d at 988; see also, Esch v. Lyng, 665 F. Supp. 6
(D.D.C. 1987). The Court of Appeals held that the dis-
trict court had jurisdiction of the claim under Bowen.
Esch, 876 F.2d at 985.*8
The Third Circuit likewise agrees that, under Bowen,
a plaintiff may challenge a regulation that denies proper
compensation. In Zellous v. Broadhead Associates, 906
F.2d 94 (8rd Cir. 1990), tenants brought an action
against the United States Department of Housing and
Urban Development (“HUD”) to challenge HUD’s deter-
mination not to make timely adjustments in a utilities
allowance. HUD’s decision not to adjust the allowance
meant that the tenants had to pay higher rent than they
were obligated to pay under the United States Housing
Act of 1937. The tenants sought an injunction and declar-
atory relief requiring the government to increase the
amount of reimbursement paid to landlords and directing
reimbursement of expenses that HUD should have paid.
The court concluded that, under Bowen, the relief sought
was not money damages and, therefore, that the district —
court had jurisdiction.
The Court of Appeals’ decision in this case is entirely
inconsistent with Esch and Zellous. In the District of
Columbia and Third Circuit cases, as in this case, the
plaintiffs sought to correct a rule that denied them com-
23 District courts in the District of Columbia Circuit have fol-
lowed the Esch decision, holding, for example, that a district court
has jurisdiction to consider a prayer for a declaration of the piain-
tiff’s entitlement to reimbursement of funds withheld under a farm
subsidy program. Peterson Farms I v. Madigan, 782 F. Supp. 1
(D.D.C. 1991). The district court also has held that it has jurisdic-
tion to hear the challenge by certain dairy farmers to the Secre-
tary’s denial of compensation under the Dairy Termination Pro-
gram. Vandervelde v. Yeutter, 774 F. Supp. 645 (D.D.C. 1991).
sali iia ici |
25
pensation from a federal agency. Indeed, jurisdiction in
this case is even clearer because a determination that
the SE Regulations are tantamount to an order of de-
struction under Section 134a was only a part of the relief
requested. Rose Acre sought a declaration under the
APA that the SE Regulations are unlawful in their
entirety for several reasons, including that the regula-
tions are not rationally related to disease control. Even
if the Court of Appeals had been correct in refusing to
declare the SE Regulations unlawful in their entirety
(and it was not), the Court should have followed Bowen
and its progeny and affirmed the District Court’s declara-
tion that the non-indemnification rule is unlawful.
B. Rose Acre’s Claim Presents Important Federal Pro-
cedural Issues
Confusion about which court has jurisdiction over a
particular category of claims can waste judicial resources.
As Justice Scalia observed in his dissent in Bowen, noth-
ing is more wasteful than litigating about where to liti-
gate. Bowen, 487 U.S. at 930 (Scalia, J., joined by Rehn-
quist, C.J., and Kennedy, J., dissenting). This case is a
good example. The Court of Appeals agreed that Rose
Acre properly could bring its claim in District Court and
ruled against Rose Acre on the merits of several argu-
ments. However, the Court of Appeals refused to affirm
even the portion of the District Court’s decision pertain-
ing to the compensation rule and would have Rose Acre
relitigate the issue in the Claims Court, resulting in in-
efficient claim splitting.
The Court of Appeals’ decision will cause confusion for
parties seeking to challenge an agency’s rule against
paying money, in part because the Court of Appeals did
not clearly establish any principle with respect to when
declaratory relief, rather than damages from the Claims
Court, is appropriate. In holding that the District Court
may not declare unlawful the rule against indemnification,
the Court of Appeals seemed to base its decision on the
26
fact that such a holding might, in effect, ultimately lead to
the payment of money. That approach is erroneous.
There is no reason to believe that the Claims Court has
any special expertise in deciding claims based on the
Secretary’s complex agricultural subsidy and compensa-
tion programs. Indeed, Bowen recognizes that district
courts are better suited to resolve claims involving such
complex and ongoing programs. Bowen, 487 U.S. at
907-08."
Ultimately, the
“question whether the District Court has the power
to enter the order it did is governed by the plain
language of 5 U.S.C. 706. It seems perfectly clear
that, as ‘the reviewing court,’ the District Court had
the authority to ‘hold unlawful and set aside agency
action’ that it found to be ‘not in accordance with
law.’ ”
Bowen, 487 U.S. at 911. (footnote omitted). The Court
of Appeals’ judgment to the contrary incorrectly decided
a recurring question of general importance in a manner
inconsistent with decisions in other circuits.
24 The District Court is also a more appropriate forum in which
to hold a hearing on the issues presented by such challenges. The
Court of Appeals’ criticism of the District Court in this case for
holding a hearing, see App. 10a, is unfounded and based on an
incorrect statement of the law. The District Court properly recog-
nized that “ ‘the focal point for judicial review should be the ad-
ministrative record already in existence, not some new record made
initially in the reviewing court.’” App. 22a. (quoting Florida Power
and Light Co. v. Lorion, 470 U.S. 729, 743 (1985)). The District
Court canvassed the relevant case law, finding situations in which
evidentiary hearings are appropriate, including, inter alia, when
the reviewing court needs additional evidence to assist it in under-
standing the technical issues presented by the administrative record.
27
CONCLUSION
For the foregoing reasons, the Petition for a Writ of
Certiorari should be granted.
Respectfully submitted,
BRIAN K. BURKE
Counsel of Record
JOHN R. SCHAIBLEY, III
BRADLEY MERRILL THOMPSON
DAVID A. GIVEN
BAKER & DANIELS
800 North Meridian Street
Suite 2700
Indianapolis, Indiana 46204
(317) 237-0300
Counsel for Petitioner,
Rose Acre Farms, Inc.
APPENDIX
la
APPENDIX A
IN THE UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Nos. 91-2358 and 91-2514
ROSE ACRE FARMS, INC.,
Plaintiff-A ppellee,
Cross-A ppellant,
V.
EDWARD MADIGAN, Secretary of Agriculture, et ai.,
Defendants-A ppellants,
Cross-A ppellees.
Appeals from the United States District Court
for the Southern District of Indiana, New Albany Division
No. NA 90-175-C—S. Hugh Dillin, Judge
ARGUED DECEMBER 6, 1991—DEcIDED FEBRUARY 10, 1992
Before BAUER, Chief Judge, and EASTERBROOK and
KANNE, Circuit Judges.
EASTERBROOK, Circuit Judge. The bacterium Salmo-
nella- enteritidis serotype enteritidis produces a violent
illness, accompanied by fever, diarrhea, and vomiting,
often requiring hospitalization. In the young, the old, and
those weak for other reasons, salmonella can be fatal.
2a
(For convenience we call both the bacterium and the dis-
ease “salmonella.”’) Milk and poultry products provide
nutrients for the bacterium, and improperly handled food
is its principal vector. An upsurge in reported instances
of salmonella transmitted through food led federal officials
to inquire why. One distressing possibility: a mutated
form of the bacterium passes from chicken to egg before
the shell forms, lying in wait to cause disease whenever
the eggs are not cooked. As some persons use raw eggs to
make hollandaise sauce and Caesar salads, and others do
not store or cook eggs properly, the presence of bacteria
poses a danger to public health. Hotels, nursing homes,
and restaurants may use hundreds of eggs to produce
batches of food. If even one egg contains salmonella, the
batch will be contaminated; if the mixture sits at room
temperature between steps in the preparation, the bac-
teria multiply rapidly.
The Department of Agriculture issued regulations that
it believes will reduce the risk of salmonella transmitted
in eggs. 56 Fed. Reg. 3730 (Jan. 30, 1991), to be codified
at 9 C.F.R. §§ 82.30-82.38. (Amendments at 57 Fed. Reg.
776 (Jan. 9, 1992), do not affect our case.) After sal-
monella strikes, federal officials try to find the source of
the food that the victims ate. When eggs are involved, the
Department tests both the chickens and their surround-
ings for the bacterium. While the testing is underway—
and afterward, if salmonella is found in either the birds
or their environment—the producer may not sell eggs from
that flock for consumption as table eggs. Until the flock
has been certified salmonella-free, the owner may sell the
birds for meat or may sell the eggs to “breakers” (firms
that incorporate the eggs into other products, such as cake
mixes, after pasteurization that eliminates all risk of
salmonella), but may not sell whole eggs in cartons.
Under this approach risk to consumers falls close to
zero. The producer pays for the consumers’ gain. Whole
table eggs fetch a higher price than eggs sold to breakers,
3a
and layer hens are worth much more when producing eggs
than when slaughtered. A ban on the sale of whole eggs
can turn a profitable operation into a losing one—and the
loss may be substantial when the producer is specialized
to the production of table eggs, as Rose Acre Farms is.
See A.A. Poultry Farms, Inc. v. Rose Acre Farms, Inc.,
881 F.2d 1396, 1407-08 (7th Cir. 1989). Salmonella has
been traced to three of Rose Acre’s flocks, and the firm
filed this suit under the Administrative Procedure Act
seeking an end to interference with its sale of whole eggs.
Rose Acre advanced three principal challenges to the
regulations: first that they are beyond the power of the
Department of Agriculture because they protect consum-
ers rather than animals; second that any belier that sal-
monella in chickens poses a risk to consumers (or that
these regulations would alleviate the problem) is arbi-
trary; third that the Department’s unwillingness to offer
compensation for the loss created by the ban invalidates
the rules. The district court rejected the first two lines of
argument but accepted the third. 1991 U.S. Dist. LEXIS
8691 (S.D. Ind.). The court went on to hold that the
testing provisions in one rule are independently invalid.
The Department of Agriculture has appealed. So has Rose
Acre—a puzzling step, as it won in the district court. A
prevailing party is entitled to advance in support of its
judgment all arguments it presented to the district court.
It need not and should not file a cross-appeal just because
the district judge rejected one of its arguments on the
way to deciding in its favor. Massachusetts Mutual Life
Insurance Co. v. Ludwig, 426 U.S. 479 (1976) ; Jordan v.
Duff and Phelps, Inc., 815 F.2d 429, 439 (7th Cir. 1987).
I
We start with the reason the district court gave for
annulling the regulations—that Rose Acre is entitled to
compensation. There are three potential sources of obliga-
tion to compensate: the takings clause of the fifth amend-
4a
ment and two statutes, 21 U.S.C. §§114a and 184a(d).
The Secretary of Agriculture believes that none of these
requires compensation, not only because he has not or-
dered the destruction of any animal but also because the
owners may make productive use of their birds by selling
the eggs to breakers. To this Rose Acre replies that it is
impossible to eliminate the bacterium from the environ-
ment without “depopulating” the chicken coops (a eu-
phenism for killing the hens). Allowing famers to sell the
eggs or hens diminishes the loss but does not remove the
directive from the category of takings.
Although the Secretary draws a bright line between
ordering the destruction of the birds and ordering their
owners to take other actions that lead to loss, we suppose
that even the Department of Agriculture would concede
that giving the owner a choice between killing the birds
and lofting them into orbit (in pressure suits, so they do
not die) is the equivalent of an order to destroy the birds.
An “alternative” that is less attractive financially than
slaughter is the functional equivalent of a command to
destroy the animals. And after United States v. Causby,
328 U.S. 256 (1946), it is hardly possible to say that only
the transfer or physical destruction of property is a “‘tak-
ing.” Airplanes flying low over a chicken farm caused
some birds to die from fright; surviving birds laid fewer
eggs. The diminution in the value of the farm was a
“taking,” the Court held. Perhaps an order justified by
the need to prevent the spread of disease does not call
for compensation under the Constitution, see Miller v.
Schoene, 276 U.S. 272 (1928), but Rose Acre observes
that § 1384a requires payment even when the destruction
is justified by contagion.
Before issuing the regulations, the Secretary concluded
that neither the Constitution nor a statute requires com-
pensation. The preamble to the regulations states that the
Department “does not intend to authorize payments of
claims for chickens voluntarily destroyed, to order man-
seeeeneraaiceseaiaaa acta iiislaaiaiiaiaiiiiiiiieal
5a
datory depopulation of infected chicken flocks and pay
indemnities to the owners of destroyed chickens, or to
make indemnity payments for eggs sold for pasteuriza-
tion.” 56 Fed. Reg. at 8731-32. The district judge
thought otherwise. Holding that compensation is due
under § 134a if not directly under the fifth amendment,
the district court set aside the regulations themselves.
No compensation, no regulation.
If either a statute or the Constitution requires compen-
sation, one would suppose, the right way to proceed is
to order payment, not to permit the sale of eggs that may
kill people. What induced the district court to scratch out
the regulations rather than to order payments is the
Tucker Act’s allocation of jurisdiction between district
courts and the claims court. Only the claims court may
award more than $10,000 against the United States on
account of claims under the Constitution or statutes such
as §134a. Compare 28 U.S.C. § 1346(a) (2) with 28
U.S.C. §1491(a) (1). Because the district court could
not give Rose Acre the money to which that court believed
it entitled, the court instead ordered the Secretary to
cease the acts that gave rise to the need for compensation.
The Secretary contends that the district court lacks
such power because the United States has not surrendered
its immunity from suit, but this argument is unavailing.
The APA allows judicial review of agency actions, and
Congress has terminated sovereign immunity when the
suit does not involve “money damages.” 5 U.S.C. § 702.
Rose Acre did not obtain money damages, did not even
obtain an order that will lead to damages. Instead the
judge issued an order that eliminates the need for dam-
ages. Such an order is within the court’s subject-matter
jurisdiction. See Bowen v. Massachusetts, 487 U.S. 879
(1988).
Jurisdiction to enjoin enforcement of the regulations
is not the problem. Instead the difficulty lies in the
6a
choice of remedy. If indeed the Constitution or a statute
calls for compensation—a question on which we express
no view—then setting aside the regulation is the wrong
remedy. Compensation is the right one. The district
court held the regulations invalid only because it could
not award compensation. Yet Rose Acre’s decision to
file this suit in a court that cannot award the proper
remedy hardly entitles it to some substitute and inappro-
priate remedy.
Rose Acre asked the district court to forbid acts that
it believes “take” its eggs, and the court obliged. But
the takings clause does not forbid takings; it requires
compensation for takings. It reads: “nor shall private
property be taken for public use, without just compensa-
tion.” No one doubts that if these regulations “take”
Rose Acre’s property, the taking is for “public use”. Cf.
Berman v. Parker, 348 U.S. 26 (1954). If compensa-
tion is forthcoming, the Constitution allows the taking.
The Tucker Act offers whatever compensation the Con-
stitution requires. Rose Acre does not contend that the
Tucker Act has been repealed by any of the agricultural
statutes. Access to payment under the Tucker Act means
that the taking may proceed. That a district court can-
not order payment is irrelevant; the question is whether
the United States will supply “just compensation.”
Through the claims court it will (if any is due), so
there is no justification for interference with the taking.
Regional Rail Reorganization Act Cases, 419 U.S. 102,
124-25 (1974); Ruckelshaus v. Monsanto Co., 467 U.S.
986, 1016 (1984); Preseault v. ICC, 494 U.S. 1, 11-12
(1990).
Congress could of course create an entitlement to be
free of takings in lieu of the constitutional requirement
of compensation for takings. Rose Acre does not con-
tend that any statute does this. The only statutes perti-
nent to the subject, 21 U.S.C. §§114a & 134a(d), are,
like the fifth amendment itself, compensation rules rather
Ta
than obstacles to the taking. Section 134a(d) provides:
“Except as provided in subsection (e) of this section,
the Secretary shall compensate the owner of any ani-
mal, carcass, products, or article destroyed pursuant to
the provisions of this section.” Section 114a allows the
Secretary to provide compensation in additional cireum-
stances. Neither statute offers the slightest foundation
for interdicting the order to destroy the animal or agri-
cultural product.
As the district judge saw things, the warning that the
Secretary “does not intend to authorize payments” is
equivalent to forbidding payments. We do not read the
language so. The Department has announced a litigating
position. It believes that neither the fifth amendment
nor a statute requires compensation, so it does not plan
to pay. Someone who disagrees may repair to the
claims court. If, as the district court believed, the Secre-
tary is wrong, then the claims court will award com-
pensation. If, however, the Secretary is right, then no
compensation is due. Either way, it is inappropriate to
halt the regulatory program. A court may not insist that
the Department trumpet the producers’ view of the law;
capitulation is not a precondition to regulation. Even if
this is wrong, and a preamble to a regulation has the
force of law, the appropriate remedy is to excise the of-
fending text, and the appropriate surgeon is the claims
court.
Rose Acre submits that the claims court lacks “juris-
diction” to “invalidate” the “rule” barring compensation.
True it is that the claims court lacks general equitable
powers, Richardson v. Morris, 409 U.S. 464 (1973), al-
though it may award some equitable relief ancillary to
an award of money. 28 U.S.C. § 1491(a) (2), (3). See
Bowen v. Massachusetts, 487 U.S. at 905-08. Yet whether
the claims court can pluck the preamble from the page
is no concern of Rose Acre’s. Notwithstanding anything
in the Federal Register, the claims court will implement
a |
8a
the Constitution and federal statutes. If Rose Acre gets
just compensation, it has no further interest in the con-
tents of musty journals. Almost the entire business of
the claims court is awarding money over the opposition
of the executive branch; that the executive announces an
intention to oppose a given demand is no reason to think
the claims court an inadequate forum.
Rose Acre must believe that the claims court will de-
cide wrongly—that although compensation is due, the
claims court and federal circuit will say that payment
is unnecessary or will compute the compensation incor-
rectly. It should go without saying that the possibility
of error by the right forum is no reason for a different
forum to award an inappropriate remedy. The chance
that the claims court will deny compensation even though
money is due is no greater (and may well be less) than
the risk that the district court will think compensation
due even though it is not. It is to the claims court that
Congress has entrusted the task of determining whether
a statute or the Constitution requires compensation. It
is to the claims court that Rose Acre must go.
II
The Secretary of Agriculture must “prepare such rules
and regulations as he may deem necessary for the speedy
and effectual suppression and extirpation of pleuropneu-
monia and other dangerous, contagious, infectious, and
communicable diseases”. 21 U.S.C. § 114. Sections 111,
114a, and 120 confer similar powers. That salmonella
is dangerous and infectious is common ground. Rose
Acre observes that salmonella is not dangerous to the
animals; it is contagious among animals but does not
injure them. According to Rose Acre, only diseases dan-
gerous to animals fall within the jurisdiction of the Sec-
retary of Agriculture. When the disease is dangerous
exclusively to humans, Rose Acre insists, the Food and
Drug Administration is the appropriate regulator. The
9a
Secretary of Agriculture has neither statutory mandate
nor expertise in dealing with human diseases, it submits.
(Rose Acre assured us at oral argument that if the FDA
had adopted the identical rules, it would not have argued
that only the Department of Agriculture has a statutory
mandate and expertise in dealing with farm animals.
We are not comforted, but our suspicions are neither here
nor there.)
The district judge rejected Rose Acre’s contention,
and properly so. As counsel for the Secretary cracked
at oral argument, Title 21 is not animal rights legisla-
tion. (The principal means for dealing with diseases are
quarantining or killing the animals, not comforting or
curing them.) Control of illness among farm animals is
for the welfare of humans: to protect our health from
diseases animals carry, and to protect our wallets from
the costs of sacrificing additional animals should the in-
fection spread. Salmonella spreads from animals to peo-
ple; it spreads among animals, potentially increasing the
financial cost to farmers; and fear of salmonella de-
presses the demand for dairy and poultry products, again
injuring agriculture. Nothing in the text of §§ 111, 114,
114a, or 120 confines the Secretary to addressing diseases
fatal to animals.
Any ambiguity in these statutes is for the Secretary
to resolve. Section 114 and similar provisions are ex-
press delegations of power to make rules. Delegation
includes the power to interpret. Contrast Pauley v. Beth-
Energy Mines, Inc., 111 S. Ct. 2524, 2534 (1991), with
Adams Fruit Co. v. Barrett, 494 U.S. 638, 649-50 (1990).
Congress called for the judgment of the Secretary, not
the judgment of a court, on the appropriate response to
diseases carried by animals. Nothing in these statutes
forbids a judgment that danger to humans justifies reg-
ulation. Trichinosis may be harmless to pigs, but its sup-
pression is within the Secretary’s purview. So too with
salmonella.
10a
Rose Acre protests that the regulatory scheme is silly.
Properly cooked eggs are safe. Bacteria in the eggs
therefore are harmless, and it is absurd to expend large
sums keeping harmless substances out of eggs. To this
the Secretary replies: eggs are not always stored and
cooked properly. Kitchen workers may spread salmonella
to hundreds of persons by oversight. These negligent
workers cannot compensate the victims; even their em-
ployers may lack sufficient assets. The costs of careless-
ness in the preparation of food can be reduced by more
care elsewhere in the food chain, with net savings—or
so the Secretary is entitled to conclude. Evidence may
be adduced on both sides, but the administrative record
supports the Secretary’s conclusion that “scientific evi-
dence suggests that SE [salmonella] is passed along to
eggs before shell formation occurs if the hen is infected
systemically with SE bacteria, and suggests vertical pas-
sage of SE from hens to chicks.” 56 Fed. Reg. at 3730.
The district court reached the same conclusion inde-
pendently after receiving evidence, which is not an ap-
propriate procedure. Courts review administrative de-
cisions on administrative records; if the record or ex-
planation is inadequate, the court should remand the
proceedings rather than make its own decision. Cronin
v. Department of Agriculture, 919 F.2d 439, 444 (7th
Cir. 1990) (“only in an emergency should a reviewing
court . . . conduct its own evidentiary hearing.”). In-
formal rulemaking under the APA creates both a record
and an explanation; the district court should have lim-
ited its attention to these. It is the Secretary’s assess-
ment of the data, not a judge’s, that the statute makes
controlling. We accept the Secretary’s judgment on the
Secretary’s record. Cf. FCC v. National Citizens Com-
mittee for Broadcasting, 4386 U.S. 775, 796-97 (1978).
Even if the Secretary is entitled to curtail the volume
of salmonella in eggs, Rose Acre submits, he is not en-
titled to do this in an irrational way. These regulations
are irrational for two reasons, Rose Acre tells us: first,
lla
it would be cheaper to test the eggs for bacteria than to
eliminate shipments from whole flocks; second, it is
whimsical to limit testing and quarantine to flocks iden-
tified by tracing back from outbreaks of salmonella.
Neither of these possibilities need detain us.
Testing for salmonella is expensive and difficult. See
General Foods Corp. v. Valley Lea Dairies, Inc., 771
F.2d 1093 (7th Cir. 1985). Testing destroys the eggs;
testing even a large sample of eggs from a given flock
will not be sufficient if the objective is to assure a very
low probability of salmonella in any shipment. The lower
the acceptable rate of infection, the greater the proportion
of eggs that must be tested. Rose Acre has not suggested
a testing regimen that both achieves the Secretary’s ob-
jective and costs less than the current regulations.
As for tracing: the Secretary is entitled to conclude
that working backwards from an outbreak identifies the
flocks that pose the greatest risk to humans. Selectivity
is the essence of judgment. If grandfather clauses are
legitimate, see FCC v. NCCB, 436 U.S. at 802-09, trac-
ing rules are not troubling. Of course the match is not
perfect. Maybe 1% of all eggs are infected, and tracing
catches only luckless suppliers whose eggs fell into the
hands of careless food preparers. But if this is so, trac-
ing is equivalent to random testing. Often the best way
to enforce a rule is by spot checks—testing, say, one of
every hundred flocks each year and acting sternly when
the test reveals salmonella. A farmer selected randomly
for testing could not protest that the Secretary should
have tested 2% or 10% of all flocks rather than 1%.
Cf. FTC v. Universal-Rundle Corp., 387 U.S. 244 (1967) ;
Moog Industries, Inc. v. FTC, 355 U.S. 411 (1958). If
the Secretary is right, tracing helps find and deal with
the most dangerous sources of salmonella at the least
cost; if Rose Acre is right, tracing is the equivalent of
random checks; either way, tracing is a lawful strategy.
12a
III
Although the district court concluded that the rules as
a whole are within the Secretary’s power (questions
about compensation to one side), it held 9 C.F.R. § 82.38,
56 Fed. Reg. at 3742-43, invalid as arbitrary.
Once an outbreak of salmonella has been traced to a
source, the flock is tested and, if any test is positive, sales
are restricted. If however the producer can show that it
maintains “biosecurity” between poultry houses, only the
birds in coops where salmonella has been found are
deemed infected; the producer can freely sell the eggs
from other layers. “Biosecurity means that flock manage-
ment procedures are in place to ensure that there is no
contact between poultry houses through exposure to
chickens, feed, water, manure, equipment, or personnel
from other poultry houses.” 9 C.F.R. § 82.30 (definition
of “separate poultry house’), 56 Fed. Reg. at 3739.
Section 82.38(b) then provides that if any poultry house
on a farm is infected, “[a]ll other poultry houses .. .
shall undergo monitoring tests . . . until 120 days after
the date infected house status is removed from all poul-
try houses on the premises.” Monitoring means that a
federal or state employee “shall collect manure and egg
transport machinery samples from each house .. . at
intervals of not less than 45 days and not more than 60
days.” Any house from which a sample is positive for
salmonella is designated a “test house,” with shipments
restricted until further testing shows it free from sal-
monella or the house has been “depopulated” and dis-
infected.
It is this repetitious testing on farms containing one
or more infected poultry houses that the district court
deemed arbitrary. Given “biosecurity,” the court thought,
there is no reason to believe that a poultry house is at
special risk just because some other house on the farm
is infected, and therefore no reason for special testing.
Grant the premise, and there is also no less reason to
ss .
13a
suppose that such a house is infected than is any ran-
domly selected house at a randomly selected farm. Ran-
dom testing is appropriate—indeed, Rose Acre wants the
Secretary to do less tracing and more comprehensive or
at least random testing—so testing of houses in this
fashion also would be appropriate.
What is more, the Secretary does not grant the prem-
ise. “Biosecurity” under these regulations is not all-or-
nothing. It is not as if a “separate poultry house” is in-
side a pressurized bubble, with food, water, air, clothing
and the farm workers contained therein sterilized as they
enter. Not even biological laboratories achieve such isola-
tion. It brings a bit of mirth to our grey profession to
compare a poultry farm with a center for research into
recombinant DNA or a plant where vaccine is manufac-
tured—places where greater efforts in the direction of
biosecurity cost hundreds of dollars per pound of product.
Farms are biologically leaky. Salmonella from the in-
fected house may spread to nearby houses despite the best
efforts. Testing to find out whether this has happened is
a precaution. It may be that the probability of spreading
does not justify the costs, but such arguments are for the
Secretary and not the court. We repeat, it is the Sec-
retary’s view of the costs and benefits of regulation that
Congress has made controlling.
Many thoughtful persons believe that the Code of Fed-
eral Regulations overflows with unjustified, even per-
verse, rules; every thoughtful person believes that some
of the rules are unjustified. Under the APA, the judicial
task is limited to pruning the outliers. If the adminis-
trative record does not reveal a compelling need to adopt
these regulations in the form the Secretary chose, it as-
suredly does not reveal that the regulations are muddle-
headed meddlesomeness. How far, and how, to regulate
poultry production to curb the risk of salmonella are
l4a
economic, social, and political rather than legal questions.
How far compensation may be necessary is a legal ques-
tion, but one for another court.
REVERSED
A true Copy:
Teste:
Clerk of the United States Court of
Appeals for the Seventh Circuit
15a
APPENDIX B
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION
No. NA 90-175-C
Rose ACRE FARMS, INC.,
ilies Plaintiff,
EDWARD MADIGAN, Secretary of Agriculture of the United
States, JAMES W. GLosseR, Administrator, Animal and
Plant Health Inspection Service of the United States
Department of Agriculture, and the UNITED STATES
DEPARTMENT OF AGRICULTURE,
Defendants.
MEMORANDUM OF DECISION
Plaintiff Rose Acre Farms (Rose Acre) seeks a declara-
tory judgment that certain regulations promulgated by
the United States Department of Agriculture are invalid.
The defendant filed two motions to dismiss, which are
hereby denied.
A hearing was held on April 26, 1991 at which time the
plaintiff and the defendants presented evidence. Pursuant
to Rule 65(a) (2), F.R.Civ.P., and plaintiff’s motion to
consolidate the trial on the merits with the hearing on the
preliminary injunction, the Court finds that no further
evidence is necessary to resolve the claims before it; there
fore the trial of the action on the merits is considered to
be advanced and consolidated with the hearing. The Court
now makes the following findings of fact and conclusions
of law in the form of this memorandum of decision. Rule
52(a), F.R.Civ.P.
Background
On February 16, 1990, defendants United States De-
partment of Agriculture (USDA), the Secretary of Agri-
16a
culture, and the Administrator of the Animal and Plant
Health Inspection Service (APHIS) of USDA, promul-
gated interim regulations purportedly to control the
spread of salmonella enteritidis serotype enteritidis (SE).
55 Fed. Reg. 5576, 9 C.F.R. §§ 82.30-82.36 (1990) (In-
terim SE Regulation). USDA made the Interim SE Regu-
lation effective on February 16, 1990, the date on which
it was first published in the Federal Register. The In-
terim SE Regulation set up a procedure which, inter alia,
restricted interstate movement of table eggs from certain
designated poultry flocks. On January 30, 1991, USDA
published a final SE regulation (Final SE Regulation),
which purports to replace the Interim SE Regulation. 56
Fed. Reg. 3730, 9 C.F.R. §§ 82.30-82.38 (1991). (The
Interim SE Regulation and the Final SE Regulation are
referred to collectively as the SE Regulations). The Final
SE Regulation makes certain modifications and additions
to the Interim Regulation.
Plaintiff Rose Acre Farms (Rose Acre) is in the busi-
ness of producing poultry table eggs for sale, and owns
and operates several egg-producing farms. It is, accord-
ing to its complaint, the second largest egg producer in
the United States. Three of its farms were tied to SE
outbreaks in humans. After testing under the Interim
SE Regulation, restrictions were imposed at two of its
facilities.
On December 28, 1990, Rose Acre filed its complaint in
this action seeking a declaratory judgment that the In-
terim Regulation was invalid in that it (1) deprived
Rose Acre of due process, (2) was not promulgated in ac-
cordance with the Administrative Procedure Act (APA),
5 U.S.C. § 5511 et seg., (3) exceeded USDA’s statutory
authority, and (4) violated Rose Acre’s right to equal
protection under the Fifth Amendment to the Constitution
of the United States. On February 18, 1991, Rose Acre
filed its First Amended Complaint seeking a declaratory
judgment that the Interim or the Final Regulations are
17a
invalid on the basis that (1) they deprive Rose Acre of
due process, (2) the Interim Regulation was not promul-
gated in accordance with the APA, (3) both regulations
exceed USDA’s statutory authority, (4) the Final Regu-
lation may not be applied retroactively, and (5) the regu-
lations unlawfully delegate authority to state officials.
Rose Acre has now amended its First Amended Complaint
adding two new counts. In Count VII, plaintiff claims
that application of certain monitoring provisions is in-
valid, and in Count VIII, plaintiff claims that it is en-
titled to compensation for eggs diverted to pasteurization
facilities, hard boiling or export under the SE Regula-
tions.
Discussion
SE Regulations
The SE Regulations set out a system of testing and
monitoring poultry chicken flocks for SE, and for restrict-
ing eggs and other articles deemed infected or at high
risk for infection. There are three levels of testing which
may be applied to a poultry flock.
First level An egg production flock is determined to be
a “study flock” when it has been “implicated as the prob-
able source of disease in an outbreak of disease in hu-
mans or poultry caused by [SE],” or when the flock has
received progeny from a breeding flock that has had SE
recovered from the internal organs of one or more chick-
ens through testing in accordance with other sections of
the regulations. 56 Fed. Reg. 3740 (9 C.F.R. § 82.32 (a) ).
No restrictions are placed on study flocks unless the per-
son in control of the flock refuses to permit further test-
ing, in which case the flock automatically becomes a “‘test
flock.” 56 Fed. Reg. 3740 (9 C.F.R. § 82.32(b) (1)).
Second level. After a flock has been classified a “study
flock, tests are conducted upon samples from manure and
upon egg transport machinery to determine the existence
of SE in the “environment.” Jd. at 3740 (§ 82.32 (b) ).
18a
if the flock does not contain separate houses as defined in
§ 82.30, then the entire flock is deemed a test flock. Sepa-
rate houses are those deemed to have biosecurity to pre-
vent the transmission of communicable disease to other
poultry houses. (§ 82.30). Eggs from a test house or
test flock may not be shipped in interstate commerce as
table eggs, but may be shipped interstate to pasteurization
facilities (also known as “breakers”), for hard boiling
at an egg products plant, or for export ' from the United
States. Jd. at 3741 (§ 82.33(a)).
Third level. After classification as a test flock or house,
blood and internal organ samples are collected and tested.
Id. at 3740-41 (§ 82.82(c)). If the samples test positive
for SE, the flock or house is deemed to be “infected.” Jd.
If the samples test negative, then the house or flock is
retested. Jd. If the test results are negative again, the
flock is determined not to be a study, test or infected flock.
Eggs from an infected house or flock are restricted in the
Same manner as those from a test house or flock. Jd. at
3741 § 82.33(a)).
An infected house is released from infected status when
it is depopulated and cleaned to USDA satisfaction or
when the house twice tests negative for blood and internal
organ samples. (§ 82.32(e) ).
In addition to the sampling and testing provision, the
Final Regulation contains monitoring provisions which
Rose Acre argues have been improperly retroactively ap-
plied against it.
Application to Rose Acre
Rose Acre owns and operates three facilities at which
the SE Regulations have been applied.
1 The Court finds it extremely disturbing that eggs which are
deemed unfit for sale as table eggs in our domestic market are
considered suitable for export to other countries.
19a
Cort Acres
After a wedding reception held in Kentucky on August
11, 1990, several of the guests reportedly became ill from
SE. The Kentucky Department for Health Services (Ken-
tucky Health Department) concluded that the sickness had
probably been caused by eating hollandaise sauce contain-
ing eggs, and that the eggs had come from the Cort Acres
Farm, a Rose Acre facility located near Cortland, Indiana.
Based, at least in part, on the Kentucky Health Depart-
ment’s report, USDA designated the Cort Acres facility
a “study flock” under the Interim SE Regulation on Sep-
tember 13, 1990. USDA took environmental samples, and
later, blood and tissue samples. Nine houses were even-
tually designated infected. '
White County Farm
A second SE outbreak occurred at the Hyatt Regency
Hotel in Chicago on September 30, 1990. The Chicago
Department of Health and the Illinois Department of
Public Health (collectively, the Illinois Health Depart-
ment) jointly investigated the Hyatt outbreak. The Illi-
nois Health Department issued a report in which it con-
cluded that eggs used in a bread pudding with vanilla
sauce desserts were the probable source of the SE out-
break, and that the eggs came from the flock at Rose
Acre’s White County Farm, in White County, Indiana.
Based, at least in part, on the Illinois Health Depart-
ment’s report, USDA designated the White County farm
a “study flock.”
USDA conducted environmental tests on a group of
houses known as the second quartile, and then on the
first quartile. Based on these tests, USDA declared both
quartiles “test flocks” under the SE Interim Regulations.
On January 25, 1991, USDA commenced blood and tissue
testing on both quartiles. On February 8, 1991, USDA
designated the first and second quartiles at the White
County farm an “infected flock.” Subsequently, USDA
20a
determined that adequate biosecurity existed between the
infected and non-infected houses at the White County
farm and certain noninfected houses were released from
“infected flock” status.
Jen Acres
On or about October 25, 1990, two families in Ten-
nessee reportedly became ill after eating a banana pud-
ding dessert. The Tennessee Health Authority issued a
report in which it concluded that ®ggs containing SE were
the likely cause of the illnesses and that the eggs came
from the Jen Acres facility in Jennings County, Indiana.
Based, at least in part, on Tennessee Health Authority’s
report, USDA designated the Jen Acres facility a “study
flock” under the Interim SE Regulation. USDA collected
and tested environmental samples from Jen Acres.
Based on the environmental test results, USDA desig-
nated the Jen Acres flock a “test flock.” USDA then con-
ducted blood and tissue tests and based on the test results
designated the entire flock and [sic] “infected flock” on
February 6, 1991. Restrictions were placed on the inter-
state movement of all Jen Acres eggs. On February 7,
1991, USDA advised Rose Acre that it would release one
house from infected flock status on the basis of negative
environmental sampling and improved biosecurity.
Rose Acre claims that it is harmed in many ways by
the application of the SE Regulations. It asserts that
classification of a flock as a study flock causes a loss of
reputation and goodwill. Rose Acre further claims that
the “test” and “infected” classifications causes harm in
that Rose Acre is forced to sell eggs for pasteurization or
hard boiling. The prices received for eggs sold into those
markets are far below the prices that prevail for shell
eggs. Rose Acre has already had to sell millions of eggs
to pasteurizers (or “breakers”) at average prices that are
below Rose Acre’s cost for the eggs. There is also appar-
ently a tendency for many breakers not to buy restricted
21a
eggs as certain food retailers will not accept the liquid
eggs made from restricted eggs. Rose Acres claims losses
of over $50,000 per day from the restrictions which have
been imposed.
Rose Acre also alleges harm in that it has spent sub-
stantial sums to clean, disinfect, and establish adequate
biosecurity among the houses.
Scope of Review
The scope of review of an agency’s informal rulemak-
ing is set forth in 5 U.S.C. § 706, which provides in
pertinent part:
To the extent necessary to decision and when pre-
sented, the reviewing court shall decide all relevant
questions of law, interpret constitutional and statu-
tory provisions, and determine the meaning or appli-
cability of the terms of an agency action. The
reviewing court shall—
* * +
(2) hold unlawful and set aside agency action,
findings and conclusions found to be—
(A) arbitrary, capricious, an abuse of discretion or
otherwise not in accordance with law;
(B) contrary to constitutional right, power, privi-
lege or immunity;
(C) in excess of statutory jurisdiction, authority or
limitations, or short of statutory right;
(D) without observance of procedure required by
law;
The scope of review of agency regulations under the
arbitrary and capricious standard is narrow, and a court
is not to substitute its own judgment for that of the
agency. Motor Vehicle Manufacturers Ass’n of the United
States, Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
22a
29, 43, 103 S.Ct. 2856, 2866, 77 L.Ed.2d 448, 458 (1983).
Even under this standard, the court is required to engage
in a “thorough, probing, in-depth review.” Citizens to
Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415,
91 S.Ct. 814, 823, 28 L.Ed.2d 136, 153 (1971).
A preliminary concern in this case is what evidence the
Court should consider in reviewing these Regulations. In
a motion in limine defendants asked the Court not to con-
sider evidence beyond the administrative record. The ad-
ministrative record here is comprised of the Interim and
Final Regulations, along with the agency explanation and
comments thereto, and the letters submitted to the agency
during the comment period after promulgation of the
Interim Regulation. At the trial, Rose Acre offered
extra-record evidence including deposition testimony of
various USDA officials, and live testimony from Dr. Law-
rence T. Glickman, Professor of Epidemiology and En-
vironmental Medicine at Purdue University. The defend-
ants introduced testimony from Dr. John Mason, Director
of the Salmonella Task Force of APHIS.
The United States Supreme Court has stated that gen-
erally “the focal point for judicial review should be the
administrative record already in existence, not some new
record made initially in the reviewing court.” Florida
Power & Light Co. v. Lorion, 470 U.S. 729, 7438, 105
S.Ct. 1598, 1607, 84 L.Ed.2d 648, 656 (1985). However,
courts have carved out broad exceptions to this general
principle that “are now so far reaching that they can be
applied in almost any case.” Stark and Wald, Setting
No Records: The Failed Attempt to Limit the Record on
Review of a Judicial Administrative Action, 36 Admin.
L. Rev. 333, 343 (1984). Such exceptions include: (1)
when an agency action is not adequately explained in the
record before the court, see Overton Park, 401 U.S. at
420, 91 S.Ct. at 825, 28 L.Ed.2d at 155; (2) when the
agency ignored relevant factors it should have considered
in making its decision, see Hiatt Grain & Feed, Inc. v.
23a
Bergland, 446 F.Supp. 457, 467 (D.Kan. 1978), aff'd on
other grounds, 602 F.2d 929 (10th Cir. 1979), cert.
denied, 444 U.S. 1073, 100 S.Ct. 1019, 62 L.Ed.2d 755
(1980); Asarco, Inc. v. EPA, 616 F.2d 1153 (9th Cir.
1980) ; (3) when the agency considered factors that were
left out of the formal record, see Environmental Defense
Fund Inc. v. Blum, 458 F.Supp. 650, 661 (D.D.C. 1978) ;
(4) when the case is so complex and the record so un-
clear that the reviewing court needs more evidence to en-
able it to understand the issues, see Bunker Hill Co. v.
EPA, 572 F.2d 1286, 1292 (9th Cir. 1977); and (5)
when evidence arising after the agency acted demon-
strates that the actions were right or wrong, see American
Petroleum Institute v. EPA, 540 F.2d 1023, 1034 (10th
Cir. 1976), cert. denied, 430 U.S. 922, 97 S.Ct. 1840, 51
L.Ed.2d 601 (1977).
The Court finds that the above exceptions apply to the
instant case. The agency record contained over 300 pages
of comments from poultry trade associations, flock own-
ers, state animal and public health agencies, universities
and others as well as the SE Regulations themselves and
the agency’s own explanation and comments. However,
none of this information sufficiently explains the scientific
basis of the SE Regulations or the scientific and public
and animal health consequences of promulgating and en-
forcing the SE Regulations. The extra-record testimony
submitted in this case helps to explain the basis, or lack
thereof, and helps illuminate technical issues. For these
reasons, the Court declined to exclude the evidence and
declines not to omit it from its review of the agency
action.
1. USDA Authority to promulgate the SE Regulations;
Rational Basis of the Regulations
Rose Acre argues that USDA did not have the authority
to promulgate the SE Regulations, and that even if USDA
had such authority, the Regulations are invalid because
24a
they are arbitrary and capricious. The argument that
USDA has authority over animal health matters and not
human health matters, and that the Regulations are not
rationally related to animal health, is common to both
claims.
USDA contends that its authority to promulgate the
Regulations derives from Title 21 U.S.C. §111, which
statute provides in relevant part:
The Secretary of Agriculture shall have authority to
make such regulations and take such measures as he
may deem proper to prevent the introduction or dis-
semination of the contagion of any contagious, infec-
tious, or communicable disease of animals and/or live
poultry from a foreign country into the United
States or from one State or Territory of the United
States or the District of Columbia to another .. . and
to seize, quarantine, and dispose of any .. . animal
products coming from one State or Territory or the
District of Columbia in transit to another . . . when-
ever in his judgment such action is advisable in order
to guard against the introduction of such contagion.
Rose Acre argues that the SE Regulations are not
rationally related to the prevention of the spread of dis-
ease among animals and therefore are in excess of
USDA’s statutory mission, which is to prevent the spread
of disease among animals. We agree with the defendants
that, looking at the regulatory scheme as a whole, the
regulations do bear a rational relationship to their pur-
pose and do not exceed the scope of the agency’s authority.
The main argument that emerges from Rose Acres sev-
eral briefs treating this issue is that the SE Regulations
are primarily devoted to controlling the spread of SE
among humans, and that the proper agency to address
control of diseases among humans in the Food and Drug
Administration (FDA). Secondary to this contention is
the claim that the SE Regulations will not promote either
animal or human health.
25a
At the trial Dr. John Mason, director of USDA’s Task
Force on Salmonella, testified regarding the evolution of
the regulations, and on why they were finally promul-
gated by the FDA and USDA. It is apparent from his
testimony that various political pressures were at work,
and that both agencies were concerned with meeting
quickly what was considered an urgent need. One reason
why the USDA eventually got the project was that the
USDA was in the business of dealing with the animal
industry. As Dr. Mason said, USDA “had authority to
work on farms with poultry and animals and had the
experience.”
It is no secret that underlying the USDA’s authority
to control the spread of contagious disease among animals
is a concern for human health. The fact that the regula-
tions appear to be geared ultimately to human health,
and to reducing the occurrence of SE among humans,
does not of itself negate their stated goal of reducing the
spread of SE among poultry. The Court concludes that
due to the broad public health concerns contemplated by
21 U.S.C. §111, and due to USDA’s authority to work
with farms, the defendants did not act in excess of their
authority in promulgating the SE Regulations.
Rose Acre contends that even if the defendants had
authority to promulgate the SE Regulations, the regula-
tions are invalid since they are arbitrary and capricious.
Rose Acre argues that the SE Regulations are not
rationally related to protecting either human or animal
health in that they have no scientific basis. It argues
that the regulations are flawed in that 1) USDA has no
baseline data to show the prevalence of SE in egg-type
chickens or in the eggs that they lay, and thus has no way
to assess the success or failure of the restrictive meas-
ures; and 2) that the SE Regulations focus on the egg
producers rather than on the food handlers, and are
therefore not scientifically directed to eliminate or reduce
the risk of SE infection.
26a
As for the second alleged flaw, there is no dispute
among the parties or among the commenters (as the Final
Regulation refers to those who submitted comments) to
the SE Interim Regulation that an outbreak of SE may
result from improper food handling. If eggs are not
cooked for the sufficient amount of time at the proper
temperature or if undercooked or raw eggs are part of
a dish which is allowed to remain unrefrigerated for
some time, salmonella organisms present in the eggs will
multiply, increasing the risk of illness to humans. It is
acknowledged even among supporters of the Interim
Regulation that individual consumers as well as food
handlers for restaurants, catering services, and similar
operations should be better educated regarding the dan-
gers of improperly handled eggs. However, this does not
mean that additional measures, such as restrictions on
eggs produced by flocks implicated in an outbreak, are
not rationally related to reducing the spread of SE.
The first alleged flaw presents the real difficulty in this
case. Whether the Regulations lack scientific underpin-
nings is not fully answered by the regulations, by the pre-
amble to the regulations, or by the comments to the
Interim SE Regulations, but was addressed at trial and
in deposition testimony submitted as exhibits during the
trial.
Dr. Lawrence Glickman, an epidemiologist and a pro-
fessor at Purdue University, stated his opinion that the
Regulations lack scientific basis.* Specifically, he stated
that at the time that the SE regulations were promul-
gated, the USDA lacked information regarding the prev-
alence of SE in layer flocks, and that the regulations were
promulgated on the assumption that SE is an alarming
2 Dr. Glickman criticized many features of the regulations. We
are most concerned here with those criticisms which could cast doubt
on the rational relationship of the regulations to their goal of
controlling the spread of SE, and therefore summarize only the most
pertinent portions of his testimony.
;
:
27a
problem requiring immediate action. If one does not know
the baseline prevalance in the flocks, he said, then the
traceback information is impossible to interpret. He sug-
gested that there is very little data to support the proposi-
tion that SE among humans is a major public health
concern. His opinion was that diversion of eggs away
from the commercial table egg market would not have any
impact on animal health, and that the tracebacks, the sero-
logic testing, and the disinfection procedures outlined in
the regulations are unproven methods of controlling SE.
He also stated that SE is not a serious poultry problem.
All of these concerns are relevant to the USDA’s deci-
sion to promulgate regulations addressing SE; however,
we do not think that Dr. Glickman’s testimony negates a
rational basis for the regulations as promulgated.
Unfortunately, the administrative record is less than
helpful. The preamble to the Interim SE Regulations
states that “SE is a serious poultry disease and public
health concern that shows no sign of abatement, but
instead appears to be increasing.” 55 Fed. Reg. 5576
(February 16, 1990). The section justifying “emergency
action” in the Interim Regulations states that “SE is
a present and expanding cause of economic concern for
the United States egg-type chicken industry, and has
also recently emerged as a serious public health concern.
Immediate action is necessary to prevent harm to the
egg-type chicken industry and the public.” Jd. at 5580.°
The Final SE Regulation describes SE infection of egg
8 The plaintiff claims that promulgation of the SE Interim Regu-
lations without allowing for a proper notice and comment period
violated the APA, 5 U.S.C. § 553. Dr. John Mason’s testimony sup-
ports the proposition that there was an agency determination, sup-
ported by at least some evidence, of a situation of urgency calling
for emergency agency action. For this reason, the Court declines
to rule that the SE Interim Regulation was invalidly promulgated
without the proper notice and comment procedures, but concludes
that the agency had good cause to make the rules immediately
effective under the Administrative Procedure Act § 553(b)(B).
28a
production chickens as “a serious public health concern,”
and observes that “SE has a severe impact on the egg
production industry by reducing consumer demand and
disrupting egg marketing channels.”
In support of its motion to dismiss, the defendants re-
lied on such statements to demonstrate that the regu-
lations were rationally related to animal health, and were
not arbitrary and capricious. We do not believe that lan-
guage contained in the preambles to the SE Regulations
in themselves constitute evidence that such a problem
exists. Nor is the administrative record very helpful on
this issue; many of the commenters endorsed the effort
to control SE, but many of them also indicated that
more studies need to be done. Certain of the commen-
tators who do endorse USDA’s intention to control what
is perceived as a growing problem merely object that the
USDA’s efforts are not directed toward education, but
only toward testing poultry and restricting the move-
ment of certain articles in the interstate market.
Dr. Mason testified as to USDA’s scientific bases for
promulgating the Regulations. He testified that before
the promulgation of the Interim SE Regulation, there had
been a sharp outbreak of a type of SE known as phage
type four in Europe, followed by an increase in SE phage
type eight in the Northeastern United States. Accord-
ing to Dr. Mason, after a report was issued by the Center
For Disease control in Georgia, the poultry industry, the
FDA, and the USDA were all concerned about the possi-
bility that there was a rising incidence of outbreaks in
this country, and that SE outbreaks implicating table
eggs might be spreading in this country. The promulga-
tion of the SE Regulations was an effort to reduce the
risk of vertical and horizontal spread of SE among
poultry.
As for the lack of baseline information regarding the
prevalence of SE in poultry flocks in the United States,
Dr. Mason testified that the USDA did not have such
information at the time of promulgating the rules, nor
29a
did the agency have it at the time of the trial, although
at the time of the trial, the USDA had begun two studies
which would yield information on the prevalence of SE
in poultry. Meanwhile, he stated, prevalence is inferred
from data regarding outbreaks in humans, which data,
according to Dr. Mason, is the most reliable information
we have at present.
Dr. Mason testified that the USDA now acknowledges
_ that SE is “not a serious problem” for poultry, but takes
the position that, as indicated in the Final SE Regulation,
SE among poultry may lead to illness in humans. He
also stated that pasteurization of eggs is likely to pro-
duce only slight benefits for animal health: clearly, the
main purpose of the pasteurization process is to prevent
illness in humans. He also indicated, as do the Final
Regulations, that the risk of poultry mortality due to
SE among the flocks is low. The economic concern is
that poultry producers will receive negative publicity if
they are implicated in an SE outbreak among humans.
The agency position is that reducing the risk of such
outbreaks among humans will benefit the industry as a
whole as it will reduce the chances for negative publicity.
We do not believe that the regulations—either the
Interim SE Regulations or the Final SE Regulations—
should be invalidated as arbitrary and capricious merely
because the benefit to animal health is “slight” while the
real purpose of the rule is to benefit human health. Nor
do we believe that scientific underpinning is entirely
lacking for the SE Regulations, based on Dr. Mason’s
testimony. While there is clearly a call for additional
studies, the information available to the USDA when it
promulgated the Regulations appeared to indicate that
SE threatened to spread both vertically and horizontally,
and that the risk of spread could be addressed by the
procedures that the agency sought to impose. For this
reason, the Court concludes that the SE Regulations are
not arbitrary and capricious.
80a
Due Process
Rose Acre also argues that the SE Regulations violate
the due process clause of the Fifth Amendment to the
United States Constitution in that they fail “to afford
a right to an administrative hearing or review.”
The first question under due process analysis is whether
the plaintiff has a liberty or property interest. Gaballah
v. Johnson, 629 F.2d 1191, 1202 (7th Cir. 1980). We
agree with the plaintiff that it has a property interest
in its eggs and chickens, which interest is affected by
the regulations. First, under the regulations, the eggs
themselves may be restricted from interstate movement.
Thus, the defendants’ argument that this does not amount
to a deprivation of property must fail. It is true that
the eggs themselves are not confiscated or destroyed when
the restriction is imposed; however, diversion to the
allowed markets results in a deprivation of property, since
the producer is forced to sell the eggs at a price below
cost. Moreover, Rose Acre has a property interest in its
egg-producing hens. Rose Acre stands to lose some of
them through the testing process, others through depopu-
lation, and the value of others through the fact that the
eggs they produce are restricted.
As to the satisfaction of due process, the United States
Supreme Court has identified three factors which courts
should consider:
(1) the private interest that will be affected by the
official action;
(2) the risk of erroneous deprivation of such inter-
est through the procedures used, and the probable
value, if any, of additional or substitute procedural
safeguards; and finally,
(3) the Government’s interest, including the func-
tion involved and the fiscal and administrative bur-
dens that the additional or substitute procedural re-
quirements would entail.
8la
See Mathews v. Eldridge, 424 U.S. 319, 335, 96 S.Ct. 893,
903, 47 L.Ed.2d 18, 33 (1976).
The Court agrees with Rose Acre that its potential
private interest is great; Rose Acre complains that it is
losing over $50,000 per day. We also agree with the de-
fendants that the USDA and APHIS in particular have
a strong interest in reducing the risk of the spread and
occurrence of SE. We believe, however, that based on the
regulations themselves, the administrative record, and
the testimony and exhibits submitted at trial, the plain-
tiff has not demonstrated a significant risk of erroneous
deprivation, or that there would be significant value in
additional procedures, such as an administrative hearing
proceeding the imposition of restrictions.
First, the regulations themselves mandate testing and
retesting to determine whether an egg production flock
or house is infected with SE. The testing process itself
provides a safeguard that restrictions will not apply to
eggs produced by a poultry house which is not identified
as a test or infected house. Second, as the defendants
point out, “the opportunity for a hearing may be denied
if inspection, examination or testing is a better way to
find the facts.” 2 K. Davis, Administrative Law Treatise,
§ 12:12, at 455 (2d ed. 1979).‘ Here, epidemiologic in-
vestigation by trained officials, followed by laboratory
testing and resting, is apt to be more effective than hold-
ing administrative hearings to determine the likely source
of an outbreak of SE in humans. Third, we think that
administrative hearings would pose a significant burden
to the government.
* See, e.g., Door v. Donaldson, 195 F.2d 764, 766 (D.C.Cir. 1952)
(“([The Administrative Procedure Act] exempts from the require-
ments of a full hearing, because they ‘rest solely on inspections,’
only decisions that turn either upon physical facts as to which
there is little room for difference of opinion, or else upon technical
facts like the quality of tea or the conditions of airplanes, as to
which administrative hearings have long been thought unneces-
sary.’’)
32a
3. Delegation of Authority
The plaintiff claims that the SE Regulations unlawfully
delegate authority to state officials. This claim is un-
founded since no real delegation of authority has taken
place. Under the regulations, the Administrator of
APHIS has the authority to determine that a flock has
been implicated as the probable source of disease in
humans after determining that “[e]pidemiologic reports
from Federal or State health agencies identify the cause
of the outbreak as [SE].” 9 C.F.R. § 82.32(a) (1). The
Administrator is in the position of authority and respon-
sibility; reliance on reports from state and local officials
does not constitute delegation.
4. Monitoring under Section 82.38
On February 6, 1991, USDA advised Rose Acre that
it intended to conduct monitoring tests, pursuant to Sec-
tion 82.38 of the Final SE Regulations, on certain houses
at Cort Acres and Jen Acres that had previously been
released from “test flock” or “infected flock” status. Rose
Acre refused to permit USDA to conduct these monitor-
ing tests. On April 16, 1991, USDA advised Rose Acre
that if Rose Acre did not permit such monitoring tests,
USDA would declare those houses formerly released from
“test flock” and “infected flock” status to be test houses
under the Final SE Regulations.
Rose Acre claims that USDA lacks authority to moni-
tor released houses that Rose Acre has already cleaned
and disinfected pursuant to the SE Regulations. It there-
fore claims that the monitoring provision, in particular,
section 82.38(b), is invalid. The Court finds the entire
monitoring provision invalid.
Plaintiff’s claim raises two issues. First, we consider
whether the language of the monitoring provision applies
to cleaned and disinfected houses. Concluding that it does
apply,
33a
The parties’ basic dispute on this claim involves the
interpretation of § 82.38. Subsections (a) and (b) of
that section provide the following:
(a) This paragraph applies to any poultry house
that is in test poultry house status at any time when
any other poultry house on the same premises is in
infected poultry house status. If any such test poul-
try house is released from test poultry house status
in accordance with § 82.38(b) (2) of this subpart, the
poultry in the former test poultry house will be tested
a third time with the blood and internal organ tests
required by § 82.38(c) and (d) of this subpart,
within 45 to 60 days following the date the house was
released from test house status. If this blood and
internal organ monitoring test has positive results,
the poultry house will be determined to be an infected
poultry house in accordance with § 82.32(c) and (d)
of this subpart.
(b) All other poultry houses on a premises contain-
ing an infected poultry house, except any test poultry
house, shall undergo monitoring tests as follows from
the date the flock owner is notified of the determina-
tion of an infected house until 120 days after the
date infected house status is removed from all poultry
houses on the premises. A Federal representative or
State representative shall collect manure and egg
transport machinery samples from each house in ac-
cordance with § 82.382(b) of this subpart, at intervals
of not less than 45 days and not more than 60 days.
If the samples from any house test positive in accord-
ance with § 82.32(d) of this subpart, that house shall
be determined to be a test poultry house in accord-
ance with § 82.32(b) of this subpart.
Subsection (c) requires that a third set of blood and
internal organ tests be conducted on houses which had
been released from infected poultry house status. Rose
Acre contests the monitoring provision as applied to those
34a
houses which had been previously released from either
test or infected status by being cleaned and disinfected.
USDA contends that the phrase “all other’ in subsec-
tion (b) refers to all houses that are not classified as
“infected” or “test” houses. Rose Acre contends that sub-
section (b) of the monitoring provision is limited to
houses that never tested positive in the environment. It
argues that houses which previously tested positive for
SE in the environment but were cleaned and disinfected
are not subject to monitoring under subsection (c). Rose
Acre argues further that the defendants’ reading, which
would subject cleaned and disinfected houses to monitor-
ing, is at odds with USDA’s assertions that test and in-
fected houses which are completely released as a result
of three negative blood and tissue tests, are not subject
to further monitoring. It argues that the phrase “all
other” refers to houses already falling under subsection
(a).
USDA’s interpretation of the phrase “all other houses’”’
makes the most sense. First of all, section 82.38(b) uses
plain language. We believe that “all” means “all.” In
other words, monitoring will apply to houses which pre-
viously tested negative in the environment, as well as to
the cleaned and disinfected houses which are, like the
non-status houses, not classified as test or infected houses.
There is nothing in the monitoring provision itself which
would favor a non-inclusive reading of the term “all,” nor
is the plain reading at odds with the regulatory scheme
read as a whole.
Second, we reject the plaintiff’s reliance on the state-
ment of basis and purpose contained in the preamble to
the rule. The plaintiff points to the following three sen-
tences contained at 56 Fed. Reg. 3730, 3736 (January
30, 1991):
All other poultry houses (t.e., houses that tested
negative to environmental manure and egg transport
35a
machinery samples) on a premises containing an In-
fected Poultry House shall undergo monitoring tests
as follows.
Samples from other than former test houses will be
collected approximately every 45 days from each
house on the premises with the Infected Poultry
House for as long as that infected house remains
there, and for 120 days afterward.
* * tt
From the date there is no longer an Infected Poul-
try House on the premises, all houses that never had
positive environmental samples continue with envi-
ronmental monitoring for 120 days.
We think that these sentences do not support the plain-
tiff’s position on interpretation since, 1) they merely show
that cleaned and disinfected houses were not specifically
considered in the preamble (and thus were not considered
to raise different concerns from the non-status houses),
and 2) even if they are considered ambiguous as to the
monitoring provision’s application to cleaned and disin-
fected houses, they do not override the plain language of
the rule. Moreover, language in the Final Regulation’s
statement of basis and purpose supports the defendants’
position:
The fact that there is an Infected Poultry House
changes the situation for all other houses on the
premises; although past tests show them to be non-
infected, they must be monitored closely because of
the proximity of an Infected Poultry House. (While ©
we consider each separate poultry house to have ef-
fective barriers to the spread of disease between
houses through the prohibition on common poultry,
feed, water, equipment, and personnel, there is a
slight risk of spread of SE through sources than can
not practically be controlled, such as flies, rodents, or
86a
wild animals. This is the risk these monitoring tests
address. )
It is clear that the intended purpose of the monitoring
provision is to reduce the risk that SE will spread from
an infected house to any other house on the premises
which is not contaminated. We see no reason to believe
that houses which have been cleaned and disinfected are
at any less risk of being contaminated by SE-carrying
flies, rodents, or wild animals than are houses which orig-
inally tested negative in the environment.
The dispositive problem with this provision is whether
it bears a rational relationship to the control of SE. The
agency has already determined that for purposes of the
initial testing, where there is adequate biosecurity between
houses on the premises, the houses will be considered sepa-
rate units for testing purposes. Thus, where a whole
flock is determined to be a study flock and environmental
samples are taken, positive samples in certain houses lead
to further testing of only those houses, given the proper
level of biosecurity as determined by the agency. The new
monitoring provision puts Rose Acre in a new and more
difficult position which we believe is unmerited.
There is nothing in the administrative record or else-
where which contests the proposition that SE may be
carried by rodents and is not host specific. In fact, there
appears to be a consensus that SE is, if not ubiquitous in
the poultry environment, then at least quite likely to be
present. However, the presence of SE in the environ-
ment is not necessarily indicative in itself of contaminated
eggs or chickens. Further, the presence of SE in the
environment is not necessarily indicative in itself of con-
taminated eggs or chickens. Further, nothing besides the
above-quoted preamble language indicates a_ likelihood
that SE will be transmitted between houses which have
already been determined to have adequate biosecurity
between them.
aaa
37a
Environmental testing which is triggered by an out-
break of SE in humans, and applies to the entire flock as
a “study flock” makes sense: if a trace back implicates
a certain facility, the practical way to narrow the search
for the source of contamination is to begin with environ-
mental testing of the entire flock. But there has already
been such narrowing, we think that the potential connec-
tion between an infected house and other houses which
have tested negative and are non-status houses, or have
been satisfactorily cleaned and disinfected, is too tenuous
to support the monitoring outlined in § 82.38 and conflicts
with the agency’s treatment of the houses as separate
units for purposes of blood and internal organ testing.
It is such a tenuous and unproven connection that it ren-
ders the provision not rationally related to preventing the
spread of SE among poultry or humans. The agency’s
action in promulgating the monitoring provision was, we
conclude, arbitrary and capricious. For this reason, we
consider § 82.38 invalid and grant plaintiff’s request to
enjoin the defendants from applying it against Rose Acre.
5 U.S.C. § 706(2)(A); Motor Vehicle Manufacturers
Ass’n of the United States, Inc. v. State Farm Mut. Auto.
Ins. Co., 463 U.S. 29, 48, 103 S.Ct. 2856, 2866, 77 L.Ed.2d
443, 458 (1983).
5. Compensation
Plaintiff also seeks a declaratory judgment that the SE
Regulations are invalid for failing to provide compensa-
tion to flock owners. Rose Acre asserts that USDA is
required by statute to compensate owners of animals con-
demned for the purpose of preventing the spread of dis-
ease, and that the SE Regulations effectively condemn the
eggs produced in a restricted house.
A threshold matter which defendants raise concerns
jurisdiction. The defendants claim that this Court lacks
subject matter jurisdiction over the compensation issue,
and that that issue should properly be brought before the
United States Claims Court (Claims Court). We agree
38a
that if Rose Acre sought compensation, it would need to
do so in the Claims Court. However, as explained below,
we do not believe that this limits our power to consider
the issue posed by Rose Acre.
Title 28 U.S.C. § 1491{a)(1) provides that “[T]he
United States Claims Court shall have jurisdiction to
render judgment upon any claim against the United
States” founded upon, inter alia, “any regulation of an
executive department.” Under 28 U.S.C. § 1846(a) (2),
United States district courts have original jurisdiction
concurrent with the Claims Court for certain disputes
over income tax claims and for “any other civil action
or claim against the United States, not exceeding $10,000,”
founded upon “any regulation of an executive depart-
ment.”
First, defendants contend that under Ruckelshaus v.
Monsanto Co., 467 U.S. 986, 1016, 104 S.Ct. 2862, 81
L.Ed.2d 815 (1984) and Outboard Marine Corp. v.
Thomas, 773 F.2d 888, 887 (7th Cir. 1985), this Court
lacks subject matter jurisdiction over this claim since the
defendants have acted with statutory authority. This
argument fails. Although the Court finds that the USDA
had the authority to promulgate regulations aimed at con-
trolling SE and imposing testing requirements and re-
strictions as the present regulations do, we also find that
those precise regulations are defective, not because they
fail to include a mechanism for indemnification or com-
pensation, but because they expressly indicate that the
agency will not provide compensation or indemnification.
The defendants also remind us that 28 U.S.C. § 1346
(a) (2) forbids this Court to hear certain claims against
the United States in excess of $10,000, and that plaintiff
has alleged losses of $50,000 per day. To the extent that
Rose Acre were to seek compensation for its losses pur-
suant to 21 U.S.C. §§114a and 184a or the takings
clause of the Fifth Amendment, we agree that the
$10,000 limitation would control and that Rose Acre
would have to make its claims to the Secretary of Ag-
39a
riculture, and then, if those claims went unsatisfied, seek
relief in the Claims Court. However, Rose Acre does
not appear to be seeking monetary damages in the present
action before this Court. It asserts that the USDA must
pay compensation under the Fifth Amendment and un-
der the relevant statutes. However, the last paragraph
of the complaint, which is the request for relief, states
only the following:
Rose Acre seeks a declaratory judgment that the
SE Regulations are invalid because they fail to pro-
vide for just compensation to flock owners for the
fair market value of eggs restricted under the SE
Regulations.
We believe that under the reasoning below, the SE Reg-
ulations are invalid, and the injunctive relief sought can
and must be awarded by this Court.
Title 21 U.S.C. §114a states that the Secretary of
Agriculture “is authorized to control and eradicate any
communicable diseases of livestock or poultry ... which
in the opinion of the Secretary constitute an emergency
and threaten the livestock industry of the country, in-
cluding the payment of claims growing out of destruction
of animals (including poultry), and of materials, affected
by or exposed to any such disease, in accordance with
such regulations as the Secretary may prescribe.”
Under 21 U.S.C. § 184a the Secretary may order the
destruction of animals and articles that may disseminate
communicable poultry disease if they have moved inter-
state or if the Secretary has declared an extraordinary
emergency. Under § 134a(d), the Secretary must pay in-
demnity for animals that are ordered to be destroyed un-
der the statute.
The Court believes that both of the above statutes are
grounds for finding that the Secretary must indemnify
poultry owners whose eggs are restricted under the SE
Regulations.
40a
In Yancy v. United States, 915 F.2d 1534 (Fed. Cir.
1990), plaintiffs brought claims against the United
States for compensation pursuant to §114a and under
the takings clause of the Fifth Amendment of the United
States Constitution. The Yanceys owned a flock of tur-
keys which was put under quarantine after an outbreak
of Avian Influenza. Although testing showed no evidence
of the disease in the Yanceys’ flock, they were not allowed
to ship their turkeys or hatching eggs interstate during
the quarantine. Eventually, they decided to sell the
stock for slaughter, since they were spending up to
$1,800 weekly to maintain the flock. The court held that
the Yanceys did not have a right to statutory compensa-
tion under § 114a because Congress had not explicitly
created a right of compensation for voluntary slaughter
of healthy animals. Jd. at 1537-89. The court also held
that the Yanceys were entitled to compensation under the
takings clause of the Fifth Amendment for their loss. Jd.
at 1539-42.
This case differs from Yancey in that the USDA is not
restricting the movement of eggs or chickens which are
deemed to be healthy, but rather, is effectively condemn-
ing eggs once the house they come from has been labelled
an “infected” house or a “test” house. These eggs are
considered to be materials at risk for spreading SE.
We think that they fall under the language authorizing
payment for destruction of animals and materials ex-
posed to communicable disease.
Further support for the plaintiff’s position is to be
found in Julius Goldman’s Egg City v. U.S., 214 Ct. Cl.
845, 556 F.2d 1096 (Ct. Cl. 1977). In that case the
USDA ordered destruction of a poultry flock in order to
control exotic Newcastle disease. The owner sought com-
pensation pursuant to 21 U.S.C. §§114a and 184a(d).
The Secretary provided compensation, but the owner dis- .
agreed with the Secretary’s appraisal. The United States
Court of Claims held that summary judgment was pre-
4la
cluded because there were factual issues to be resolved
concerning valuation, and also held that the Secretary’s
determination of value would be upheld unless arbitrary
and capricious. Jd. at 1100-1101. What is most relevant
in the case for our purposes is 1) the Court of Claims’
recognition of the Secretary’s “far reaching” power to
eradicate communicable diseases, and the concomitant ob-
ligation for compensation under § 134a, id. at 1097; 2)
the court’s recognition of the mandatory compensation
scheme as applied to condemned poultry, see id. at 1097;
and especially 3) the description of the Secretary’s “sup-
plemental” compensation for “lost egg production value”
for egg income lost during repopulation, id. at 1098.
As in Egg City, the regulations at issue here cause flock
owners to suffer a loss of both birds and egg production
value; such owners have a statutory right to compensation.
While the plaintiff contends that requiring a party to
seek a remedy for inadequate compensation in the Claims
Court is unsound, we do not see any alternative ap-
proach for seeking monetary compensation. The method
outlined in Julius Goldman’s Egg City is that first, fed-
eral and state appraisers evaluate the poultry; next, the
Secretary makes a determination of fair market value;
and finally, if the poultry owner is dissatisfied with that
determination, the owner makes a claim in the Claims
Court. Aside from the fact that this Court could not
properly enter into the monetary valuations which are
the proper province of the Secretary or the Claims Court,
the present posture of this case makes such determina-
tions unnecessary.
Rose Acre argues that the SE Regulations must be in-
validated because they fail to provide for just compensa-
tion to flock owners for the fair market value of eggs
restricted under the SE Regulations. We do not believe
that it would be necessary for the regulations to include
such a provision, since the compensation mandate is al-
ready part of the United States Code: 21 U.S.C. §§ 114a
42a
and 134a explicitly provide for mandatory compensation
for animals (including poultry) condemned by the Sec-
retary. Thus, if the SE Regulations were silent on the
matter of compensation, we would expect the plaintiff to
seek compensation from the Secretary, and, if not satis-
fied, to bring a claim before the Claims Court.
The SE Regulations are not silent, however. Rather,
the agency adopts the position that indemnification will
not be provided:
APHIS does not intend to authorize payments of
claims for chickens voluntarily destroyed, to order
mandatory depopulation of infected chicken flocks
and pay indemnities to the owners of destroyed
chickens, or to make indemnity payments for eggs
suld for pasteurization.
56 Fed. Reg. 8731-82.
The Administrative Procedure Act, 28 U.S.C. § 553
requires that in general, when an agency promulgates
a rule it must follow procedures for notice and comment.
Subsection (c) further requires that “[a]fter considera-
tion of the relevant matter presented [by comments], the
agency shall incorporate in the rules adopted a concise
general statement of their basis and purpose.” The
plaintiff’s request for invalidation raises the issue of
whether the comments on indemnification are merely
general statements of policy, pursuant to § 553(c), or
whether they are rules, and can therefore form part of
our review of SE Regulations as a whole.
In Pacific Gas & Electric Co. v. Federal Power Com-
mission, 506 F.2d 33 (D.C. Cir. 1974), one of the leading
eases treating the policy/rule distinction, the United
States Court of Appeals for the District of Columbia
described the features of each type of statement. First,
a general policy statement is “merely an announcement
to the public of the policy which the agency hopes to im-
plement in future rulemakings of adjudications.” 506
48a
F.2d at 38. It is “not finally determinative of the issues
or rights to which it is addressed, and “it does not es-
tablish a “binding norm;” rather, it “announces the
agency’s tentative intentions for the future.” Jd. On the
other hand, a substantive rule “establishes a standard
of conduct which has the force of law.” Id.
Acknowledging the tenuousness of the distinction, the
same court elaborated further in 1987, focusing particu-
larly on whether a statement has a present and binding
effect, whether it leaves discretion in the agency, and
whether the particular language used indicates the agen-
cy’s intention. Community Nutrition Institute v. Young,
818 F.2d 948, 946-47 (D.CV. Cir. 1987). Thus, “manda-
tory, definitive language is a powerful, even potentially
dispositive, factor suggesting that [elements in the regu-
lations] are substantive rules.” Jd. at 947.
The policy/rule distinction is usually raised where an
agency’s ability to rely on a statement published without
notice and comment is questioned. However, the distinc-
tion is relevant to reviewability as well. “General policy
statements, because they are ineffective except as applied
and defended in specific proceedings, are often insulated
from judicial review at the time of issuance.” Limerick
Ecology Action v. U.S. Nuclear Regulatory Commission,
869 F.2d 719, 735-36 (8rd Cir. 1989).
Here, the agency’s statement on indemnification con-
tained in the Final SE Regulations appears to have the
characteristics of a rule. The question of indemnification
was subject to notice and comment, and agency’s pub-
lished preamble responded to comments submitted by leg-
jslators, researchers, and industry representatives. While
the phrase “does not intend” could be considered either
definite or tentative, we believe that read in context, it is
more than a tentative statement, especially since the SE
Interim Regulations had already affected poultry owners
such as the plaintiff. The language has a present effect
in that Rose Acre and other owners cannot expect agency
44a
initiation of the procedures for indemnification. Further,
it binds the agency to refrain from compensating the
poultry owners. The agency has no discretion to pay any
amount of compensation to any owners affected by the
regulations. The Court concludes that the comments on
indemnification contained in the preamble to the Final
SE Regulations are rules, as are the enumerated provi-
sions of the Regulations. Accordingly, we apply the same
standards of review to the agency’s non-indemnification
provision.
Comments in the preamble to the Final SE Regulations
attempt to justify USDA’s decision not to provide for
indemnification. The comments state that neither federal
law nor APHIS regulations require compensation for
animals voluntarily destroyed, that present conditions do
not require mandatory depopulation, and that the current
SE situation and federal actions will not cause severe
economic impact on the affected agricultural industry.°
Fed. Reg. 3730, 3731 (Jan. 30, 1991). The stipulated
facts and trial testimony disprove each of these conten-
tions.
First, the SE Regulations force the poultry owners
either to depopulate infected and test houses (i.e., to kill
the chickens) or to sell eggs from such houses at a loss.
We agree with the plaintiff that this is effectively a con-
demnation of the selected eggs and chickens, and is not
a voluntary destruction.
Second, although the agency now states that the present
situation does not call for mandatory depopulation, see
Fed. Reg. 3730, 3731, the SE Regulations treat the indus-
try as if there is an emergency—recall the basis of imme-
diate promulgation of the SE Interim Regulation—and
5 Compare comments earlier in the preamble to the Final SE Regu-
lation observing that “SE has a severe impact on the egg produc-
tion industry by reducing consumer demand and disrupting egg
marketing channels.” 56 Fed. Reg. 3730.
45a
result in the practical effect of condemnation of chickens
and eggs in affected poultry houses. As Rose Acre sug-
gests, USDA is basically withholding a declaration of an
emergency while imposing restrictions as if it has declared
an emergency. By labelling certain houses “test” and
“infected,” USDA effectively condemns the eggs produced
in those houses to be sold at less than cost. Chickens are
destroyed in the testing process, and are destroyed as to
their economic value when they are part of a house
labelled “infected.” As Rose Acre asserts, if USDA effec-
tively orders the destruction of animals by eliminating
their economic value, it cannot avoid the obligation to
compensate owners by claiming that there is no “extraor-
dinary emergency.”
Third, the administrative record and the testimony at
trial support the fact that the SE Regulations could well
have a devastating effect upon the poultry industry in the
United States. The poultry industry’s compelling call for
indemnification is supported by the comments submitted
from many state departments of health.
USDA has promulgated a regulatory scheme which we
believe impermissibly places the economic burden of con-
demnation on poultry flock owners rather than on the
agency. The record indicates that the agency may not
have established such a scheme if it also had to plan on
indemnifying the flock owners. Because the non-indemni-
fication provision is inextricably bound up with the enu-
merated substantive provisions, we conclude that a find-
ing of invalidity on the first is fatal to the whole.
The Court concludes that the agency’s decisicn not to
indemnify affected poultry owners is arbitrary and capri-
cious, is not “based on a consideration of the relevant
factors” and is a “clear error in judgment.” Motor Ve-
hicle Manufacturers Ass’n, 463 U.S. at 48, 103 S.Ct. at
2866-67, 77 L.Ed.2d at 458. The Secretary’s express de-
nial of compensation renders the SE Regulations invalid;
accordingly, the plaintiff’s request for a declaratory judg-
46a
ment invalidating them must be granted on this ground,
as well as upon that set out in the previous section of
this opinion. _
Conclusion
The Court finds that the defendants had the authority
to promulgate SE Interim and Final Regulations, that
application of the regulations does not deprive the plain-
tiffs of due process by lack of administrative hearing, and
that the SE Regulations as a whole are not arbitrary and
capricious for lack of scientific basis. On the other hand,
the new monitoring provision in the Final SE Regulation,
§ 82.38, is invalid because it does not bear a rational
relationship to the protection or promotion of animal or
human health and is therefore arbitrary and capricious.
Moreover, the SE Regulations as a whole are invalid in
that they explicitly contemplate that no mechanism for
compensation shall be provided for eggs which are re-
stricted from being sold in interstate commerce as table
eggs or for chickens executed for purposes of testing or
depopulation. Because of the express non-indemnification
provision, the SE Regulations are invalid as conflicting
both with existing statutory law and with the Fifth
Amendment.
Judgment will be entered in accordance herewith.
Dated this 5th day of June, 1991.
/s/ $. Hugh Dillin
S. HuGH DILLIN
Judge
47a
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION
No. NA 90-175-C
RosE ACRE FARMS, INC.,
Plaintiff,
-VS-
EDWARD MADIGAN, Secretary of Agriculture of the United
States, JAMES W. GLosser, Administrator, Animal and
Plant Health Inspection Service of the United States
Department of Agriculiure, and the UNITED STATES
DEPARTMENT OF AGRICULTURE,
Defendants.
AMENDMENT TO ENTRY
This Court’s Entry of June 5, 1991 in the above cap-
tioned case is hereby amended to reflect that, due to a
printing error, two lines were omitted from pages 22-23.
The last full paragraph on page 22-23, as amended, pro-
vides as follows:
Plaintiff’s claim raises two issues. First, we con-
sider whether the language of the monitoring provi-
sion applies to cleaned and disinfected houses. Con-
cluding that it does apply, we next consider whether
the monitoring provision as a whole is valid.
Dated this 14th day of June,-1991.
/s/ §. Hugh Dillin
S. HucH DILLIN
Judge
48a
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION
No. NA 90-175-C
Rose ACRE FARMS, INC.,
Plaintiff,
-VS-
EDWARD MADIGAN, Secretary of Agriculture of the United
States, JAMES W. GLOSSER, Administrator, Animal and
Plant Health Inspection Service of the United States
Department of Agriculture, and the UNITED STATES
DEPARTMENT OF AGRICULTURE,
Defendants.
JUDGMENT
The Court having this day made and entered its find-
ings of fact and conclusions of law in the above entitled
action in the form of a memorandum of decision reading
as follows: (H. I.)
IT IS THEREFORE CONSIDERED AND ADJUDGED
that the Final SE Regulation, found at 56 Fed. Reg. 3730,
9 C.F.R. §§ 82.30-82.38 (1991) is unlawful as a whole
in that the United States Secretary of Agriculture has
expressly stated that no compensation or indemnification
will be provided to poultry owners who, in compliance with
the regulations, must destroy chickens and/or divert eggs
for sale from commercial markets as table eggs, contrary
both to certain statutes and to the Constitution.
49a
IT IS FURTHER CONSIDERED AND ADJUDGED
that § 82.38 of said regulation is arbitrary and capri-
cious, and not in accordance with law for such reason.
IT IS FURTHER CONSIDERED AND ADJUDGED
that the defendants be, and they are hereby enjoined from
applying to the plaintiff said Final SE Regulation, or its
predecessor, Interim SE Regulation (55 Fed. Reg. 5576,
9 C.F.R. §§ 32.380-82.36 (1990) ).
All of which is adjudged, ordered and decreed this 5th
day of June, 1991.
/s/ S. Hugh Dillin
S. HuGH DILLIN
Judge
50a
APPENDIX C
UNITED STATES COURT OF APPEALS
FOR THE SEVENTH CIRCUIT
Chicago, Illinois 60604
February 26, 1992
Before
Hon. WILLIAM J. BAUER, Chief Judge
Hon. FRANK H. EASTERBROOK, Circuit Judge
Hon. MICHAEL 8. KANNE, Circuit Judge
Nos. 91-2358 and 91-2514
ROSE ACRE FARMS, INC.,
° Plaintiff-Appellee,
Cross-A ppellant,
v.
EDWARD MADIGAN, Secretary of Agriculture, et al.,
Defendants-A ppellants,
Cross-A ppellees.
Appeal from the United States District Court
for the Southern District of Indiana,
New Albany Division
No. NA 90-175-C—S. Hugh Dillin, Judge
ORDER
Plaintiff-Appellee, Cross-Appellant filed a petition for
rehearing on February 24, 1992. All of the judges on the
panel have voted to deny rehearing. The petition for re-
hearing is therefore DENIED.
5la
APPENDIX D
CONSTITUTIONAL PROVISIONS, STATUTES AND
REGULATIONS INVOLVED
CONSTITUTION OF THE UNITED STATES
FIFTH AMENDMENT
No person shall be held to answer for a capital, or
otherwise infamous crime, unless on a presentment or
indictment by a grand jury, except in cases arising in the
land or naval forces, or in the militia, when in actual
service in time of war or public danger; nor shall any
person be subject for the same offense to be twice put in
jeopardy of life or limb; nor shall be compelled in any
criminal case to be a witness against himself; nor be
deprived of life, liberty, or property, without due process
of law; nor shali private property be taken for public
use, without just compensation.
52a
5 USC 702
§ 702. Right of review
A person suffering legal wrong because of agency ac-
tion, or adversely affected or aggrieved by agency action
within the meaning of a relevant statute, is entitled to
judicial review thereof. An action in a court of the United
States seeking relief other than money damages and stat-
ing a claim that an agency or an officer or employee
thereof acted or failed to act in an official capacity or
under color of legal authority shall not be dismissed nor
relief therein be denied on the ground that it is against
the United States or that the United States is an indis-
pensable party. The United States may be named as a
defendant in any such action, and a judgment or decree
may be entered against the United States: Provided,
That any mandatory or injunctive decree shall specify the
Federal officer or officers (by name or by title), and their
successors in office, personally responsible for compliance.
Nothing herein (1) affects other limitations on judicial
review or the power or duty of the court to dismiss any
action or deny relief on any other appropriate legal or
equitable ground; or (2) confers authority to grant relief
if any other statute that grants consent to suit expressly
or impliedly forbids the relief which is sought.
‘5 USC 704
§ 704. Actions reviewable
Agency action made reviewable by statute and final
agency action for which there is no other adequate remedy
in a court are subject to judicial review. A preliminary,
procedural, or intermediate agency action or ruling not
directly reviewable is subject to review on the review of
the final agency action. Except as otherwise expressly
required by statute, agency action otherwise final is final
for the purposes of this section whether or not there has
58a
been presented or determined an application for a declar-
atory order, for any form of reconsiderations, or, unless
the agency otherwise requires by rule and provides that
the action meanwhile is inoperative, for an appeal to su-
perior agency authority.
5 USC 706
§ 706. Scope of review
To the extent necessary to decision and when presented,
the reviewing court shall decide all relevant questions of
law, interpret constitutional and statutory provisions, and
determine the meaning or applicability of the terms of an
agency action. The reviewing court shall—
(1) compel agency action unlawfully withheld or
unreasonably delayed; and
(2) hold unlawful and set aside agency action,
findings, and conclusions found to be—
(A) arbitrary, capricious, an abuse of discre-
tion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power,
privilege, or immunity;
(C) in excess of statutory jurisdiction, au-
thority, or limitations, or short of statutory
right;
(D) without observance of procedure required
by law;
(EK) unsupported by substantial evidence in a
case subject to sections 556 and 557 of this title
or otherwise reviewed on the record of an agency
hearing provided by statute; or
(F) unwarranted by the facts to the extent
that the facts are subject to trial de novo by
the reviewing court.
54a
In making the foregoing determinations, the court shall
review the whole record or those parts of it cited by a
party, and due account shall be taken of the rule of preju-
dicial error.
21 USC 134a
§134a. Seizure, quarantine, and disposal of livestock or
poultry to guard against introduction or dis-
semination of communicable disease
(a) Authority of Secretary
The Secretary, whenever he deems it necessary in order
to guard against the introduction or dissemination of a
communicable disease of livestock or poultry, may seize,
quarantine, and dispose of, in a reasonable manner tak-
ing into consideration the nature of the disease and the
necessity of such action to protect the livestock or poultry
of the United States: (1) any animals which he finds
are moving or are being handled or have moved or have
been handled in interstate or foreign commerce contrary
to any law or regulation administered by him for the pre-
vention of the introduction or dissemination of any com-
municable disease of livestock or poultry; (2) any animals
which he finds are moving into the United States, or inter-
state, and are affected with or have been exposed to any
communicable disease dangerous to livestock or poultry;
and (8) any animals which he finds have moved into the
United States, or interstate, and at the time of such
movement were so affected or exposed.
(b) Determination of extraordinary emergency due to
d
This text is long and has been trimmed here. Open the source document for the complete record.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.