Milk Train Inc v. Veneman, Ann M. , 310 F.3d 747 ( 2002 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
No. 01-5310 September Term, 2002
Filed On: November 20, 2002
Milk Train, Inc., et al.,
Appellants
v.
Ann M. Veneman, Secretary,
United States Department of Agriculture,
Appellee
Appeal from the United States District Court
for the District of Columbia
(No. 00cv01121)
Before: Sentelle, Rogers and Garland, Circuit Judges.
O R D E R
It is ORDERED, sua sponte, that the opinion filed herein
on November 15, 2002 is amended as follows:
Page 2, the last sentence of the first paragraph: "Insofar
as Milk Train challenges the 26,000 cwt cap, we vacate the
district court opinion on that issue for lack of jurisdiction;
otherwise ..."
Page 5, first sentence in section A: "We first address the
district court's jurisdiction to review the Secretary's regula-
tions. Steel Co. v. Citizens for a Better Env't, 523 U.S. 85, 95
(1998). According ..."
Page 6, first sentence in second full paragraph after the
comma: "... dairy farmers, we hold that the district court
lacked ..."
Page 7, last sentence of first paragraph: "Accordingly, we
vacate the district court's opinion on the issue of the 26,000
cwt cap for lack of subject-matter jurisdiction."
Page 8, first line at top of page: "hold that the district
court had jurisdiction ..."
Page 15, first sentence in full paragraph: "Accordingly, we
vacate that portion of the district court's opinion that discuss-
es the Secretary's use of a 26,000 cwt cap for lack of jurisdic-
tion, ..."
Per Curiam
FOR THE COURT:
Mark J. Langer, Clerk
BY:
Deputy Clerk
United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 10, 2002 Decided November 15, 2002
No. 01-5310
Milk Train, Inc., et al.,
Appellants
v.
Ann M. Veneman, Secretary,
United States Department of Agriculture,
Appellee
Appeal from the United States District Court
for the District of Columbia
(No. 00cv01121)
Benjamin F. Yale argued the cause for appellants. With
him on the briefs were Kristine H. Reed, Donald M. Barnes,
and Lowell H. Patterson III.
H. Thomas Byron III, Attorney, U.S. Department of Jus-
tice, argued the cause for appellee. With him on the brief
were Roscoe C. Howard, Jr., U.S. Attorney, and Mark B.
Stern, Attorney, U.S. Department of Justice.
Before: Sentelle, Rogers and Garland, Circuit Judges.
Opinion for the Court filed by Circuit Judge Rogers.
Dissenting opinion filed by Circuit Judge Sentelle.
Rogers, Circuit Judge: The question in this appeal is
whether the Secretary of Agriculture's implementation of a
1999 subsidy program for milk producers was inconsistent
with the statutory requirement that payments be made "for
economic losses incurred during 1999." Agriculture, Rural
Development, Food and Drug Administration, and Related
Agencies Appropriations Act 2000, Pub. L. No. 106-78, s 805,
113 Stat. 1135, 1179 (1999) [hereinafter "2000 Appropriations
Act"]. The Secretary's regulations defined "eligible produc-
tion" for purposes of determining how much money a produc-
er could receive as "milk produced by cows in the United
States and marketed commercially in the United States any-
time during the 1997 and or 1998 calendar year, subject to a
maximum of 26,000 [hundredweight ("cwt")] per dairy opera-
tion." 7 C.F.R. s 1430.502. Milk Train, Inc. and others
representing thirty-one large milk producers in several
states, appeal the grant of summary judgment upholding the
Secretary's regulations. Milk Train contends that the regula-
tions are contrary to a clear statutory mandate and that the
Secretary arbitrarily denied assistance for losses attributable
to production in excess of 26,000 cwt. Insofar as Milk Train
challenges the 26,000 cwt cap, we vacate the district court
opinion on that issue for lack of jurisdiction; otherwise we
reverse and remand the case to the district court with in-
structions to remand the case to the Secretary.
I.
In the last three fiscal years (FY 1999--FY 2001), Con-
gress has appropriated money to be distributed by the Secre-
tary of Agriculture to compensate dairy producers for losses
they have sustained. We refer to the moneys appropriated as
a milk producers' subsidy in the 1999 Appropriations Act as
the 1998 Program; we refer to the moneys appropriated in
the 2000 Appropriations Act as the 1999 program.
In the first year, Congress provided over $3 billion "for
assistance to owners and producers on a farm ... to partially
compensate [them] for the loss of markets for the 1998 crop
of a commodity." Omnibus Consolidated and Emergency
Supplemental Appropriations Act, 1999, Pub. L. No. 105-277,
Division A, s 101(a), Tit. XI, s 1111(a), 112 Stat. 2681, 2681-
44 (1998) [hereinafter "1999 Appropriations Act"]. In partic-
ular, Congress directed that $200 million of the moneys "shall
be available to provide assistance to dairy producers in a
manner determined by the Secretary." Id. s 1111(d). For
the 1998 program, the Secretary promulgated regulations
whereby the amount of each farm's payment would be based
on 1997 or 1998 milk production, with a cap on the maximum
eligible production level, approximately equivalent to a herd
of 150 cows (or 26,000 cwt, which represents 2,600,000 pounds
of milk). See 7 C.F.R. ss 1430.502, .504, .506. A cost benefit
analysis prepared by the Farm Service Agency ("FSA") on
December 21, 1999, indicated that 76,771 milk producers that
were in production at some time during the period October 2,
1998, through December 31, 1998, were sent checks in June
1999 based on a payment rate of 22.47897 cents per cwt, with
a maximum single payment of $5,845.
In the second year, at issue here, Congress appropriated
$325 million more to benefit livestock and dairy producers,
again directing that the funds be disbursed "in a manner
determined appropriate by the Secretary." 2000 Appropria-
tions Act s 805. Congress directed that no less than $125
million (minus administrative expenses of $2.3 million) be in
the form of assistance to dairy producers "to compensate
producers for economic losses incurred during 1999." Id.ss 825, 822. Waiving the notice and comment requirement
for implementing regulations, Congress directed that the
payments be made "as soon as practicable." Id. s 824(a).
For the 1999 program, the Secretary extended the regula-
tions for the 1998 program; she specifically extended sign-up
for the subsidy program through February 28, 2002, with the
proviso that "[d]airy operations that applied for and received
payments under the [1998 program] do not need to reapply.
Additional payments will be issued based upon the original
application." 1999 Crop and Market Loss Assistance, 65 Fed.
Reg. 7942, 7945 (Feb. 16, 2000). According to the FSA's cost-
benefit analysis, the sign-up was extended to permit the 1,100
eligible commercial operations that did not enroll in the 1998
program to enroll in the 1999 program. Payments under the
1999 program for producers who had signed up for the 1998
program (or were eligible for that program) were based on
the 1997 or 1998 production figures used for the 1998 pro-
gram. 65 Fed. Reg. at 7945. Thus, producers who had
signed up or were otherwise eligible for the 1998 program
could receive 1999 funds, even if they did not produce in 1999.
The final payment per cwt under the 1999 program was
approximately $0.1405, with a maximum single payment of
about $3,653.
Milk Train filed suit challenging the regulations for the
1999 program as arbitrary and capricious under the Adminis-
trative Procedure Act ("APA"), 5 U.S.C. s 706(2)(A), and
violative of the Non-Delegation, Takings, and Equal Protec-
tion Clauses of the Constitution. The district court, address-
ing cross-motions for summary judgment, viewed "[t]he es-
sence of this controversy [to be] whether the Secretary
exceeded her statutory authority by capping at 26,000 cwt the
amount of milk production that would be eligible for financial
assistance, the consequence of which was to bestow the bulk
of the funding on smaller dairy farmers." The court granted
judgment for the Secretary. As relevant here, the court
ruled that it had jurisdiction because the 2000 Appropriations
Act appropriating moneys for the 1999 program was not
within the lump-sum appropriations exception to APA juris-
diction under Lincoln v. Vigil, 508 U.S. 182 (1993), and
contained intelligible principles, including Congress' general
policy "to compensate dairy farmers suffering from declining
milk prices." The court rejected Milk Train's argument that
the Secretary's 26,000 cwt cap was arbitrary and capricious.
The court did not expressly address Milk Train's argument
that the Secretary's use of data from an earlier year to
allocate payment of 1999 moneys was arbitrary and capri-
cious.
II.
On appeal, Milk Train contends that the Secretary's regula-
tions are invalid because they ignore the clear statutory
mandate to compensate dairy producers for "economic losses
incurred during 1999" and arbitrarily denied assistance for
losses attributable to production in excess of 26,000 cwt.
Pointing to the different statutory language that Congress
used in appropriating funds for the 1999 program (referring
to "producers" rather than "owners and producers" and to
"economic losses" rather than "market losses," and to a
different year), Milk Train contends that while Congress did
not reinstate the 1998 program the Secretary did, by extend-
ing the regulations for the 1998 program, with the result that
payments for 1999 economic losses were based on the same
production data and paid to the same producers who qualified
for the 1998 program rather than to those who operated in
1999. As to the 26,000 cwt cap, Milk Train contends that the
phrase "in the manner authorized by the Secretary" was "not
an expression in the alternative to compensation for the
producers' 1999 economic losses" and did not authorize the
Secretary "to deny compensation on substantial portions of
the economic losses incurred in 1999 by some producers in
order to increase the amounts received by others."
A.
We first address the district court's jurisdiction to review
the Secretary's regulations. Steel Co. v. Citizens for a Better
Env't, 523 U.S. 85, 95 (1998). According to the Secretary, her
determination of the manner of providing the moneys to dairy
producers is not qualified "in any way," Appellee's Br. at 15,
and reflects a congressional judgment that the Agriculture
Department, as the expert agency charged with implementing
the nation's farm policy, is best suited to determine how the
moneys should be used to provide assistance to the nation's
dairy farmers. Whether viewed as agency action committed
to agency discretion by law under the APA, 5 U.S.C.
s 701(a)(2), or as an express delegation to make all decisions
necessary to carry out Congress' broad purpose, the Secre-
tary contends that judicial review of the Secretary's imple-
mentation decision is "extremely circumscribed."
Section 701(a)(2) of the APA exempts agency action from
judicial review "to the extent that [it] is committed to agency
discretion by law." The Supreme Court in Heckler v. Cha-
ney, 470 U.S. 821 (1985), held that an agency decision not to
institute enforcement proceedings was unreviewable. Id. at
831. Such a decision, the Court explained, involved a "com-
plicated balancing of a number of factors which are peculiarly
within [an agency's] expertise." Id. Drawing on Heckler,
the Court held in Lincoln v. Vigil that an agency decision to
cease allocating funds from a lump-sum appropriation, which
contained no restrictions on use of the funds, for a program
not mentioned in a statute or the agency's regulations, was
committed to agency discretion and likewise unreviewable.
508 U.S. at 192-93. The Court defined the scope of review
precluded under s 701(a)(2) as turning on whether the stat-
ute "is drawn so that a court would have no meaningful
standard against which to judge the agency's exercise of
discretion." Id. at 191 (quoting Heckler, 470 U.S. at 830).
The Secretary maintains that the principle set forth in Lin-
coln v. Vigil is not limited to lump-sum appropriations and
would apply if the express conferral of discretion on the
Secretary, as well as other characteristics of the administra-
tive decision at issue, bring the funding for the 1999 program
within s 701(a)(2).
Insofar as Congress has left to the Secretary's sole judg-
ment the determination of the manner for providing assis-
tance to dairy farmers, we hold that the district court lacked
jurisdiction to review Milk Train's challenge to the 26,000 cwt
cap on eligible production. Congress provided that the mon-
eys for 1999 economic losses were to be used "to provide
assistance directly to ... dairy producers, in a manner deter-
mined appropriate by the Secretary." 2000 Appropriations
Act s 805. Milk Train relies on Whitman v. Amer. Trucking
Ass'n, 531 U.S. 457, 465-71 (2001), to support its contention
that the absence of express statutory authority for the Secre-
tary to impose payment limitations makes the 26,000 cwt cap
unlawful. But unlike the Clean Air Act provisions analyzed
in Whitman that expressly limited the discretion of the
Administrator by mandating the imposition of pollution regu-
lations "requisite to protect the public health," 42 U.S.C.
s 7409(b)(1), the plain language in the 2000 Appropriations
Act indicates that Congress left to the Secretary the decision
about how the moneys for 1999 economic losses could best be
distributed consistent with its general policy to provide emer-
gency assistance to dairy farmers "[a]s soon as practicable,"
id. s 824(a). The statute thus provides no relevant "statuto-
ry reference point" for the court other than the decision-
maker's own views of what is an "appropriate" manner of
distribution to compensate for 1999 losses. Drake v. FAA,
291 F.3d 59, 72 (D.C. Cir. 2002); cf. Wester v. Doe, 486 U.S.
592, 600-01 (1988). A decision memorandum prepared for
the Secretary in connection with the 1998 program described
five options for allocating the moneys, each containing a
listing of the pros and cons of each option. Choosing between
those options clearly requires "a complicated balancing of a
number of factors which are peculiarly within [the Secre-
tary's] expertise." Lincoln, 508 U.S. at 193 (quoting Heckler,
470 U.S. at 831). Milk Train does not dispute that the
Secretary used the 1999 program funds to provide assistance
to compensate dairy producers for their losses; it challenges
the 26,000 cwt cap based on the distribution of those funds
among eligible producers. Accordingly, we vacate the district
court's opinion on the issue of the 26,000 cwt cap for lack of
subject-matter jurisdiction. Foodservice & Lodging Inst.,
Inc. v. Regan, 809 F.2d 842, 847 (D.C. Cir. 1987) (per curiam).
We reach a different conclusion with regard to Milk Train's
base-year challenge to the Secretary's regulations. By pro-
viding in the 2000 Appropriations Act that the moneys are for
"economic losses incurred during 1999," 2000 Appropriations
Act s 805, Congress limited the Secretary's authority to
disburse funds. This limitation affords a "statutory reference
point" by which the court is able to review the Secretary's
determination of which producers are eligible to receive funds
under the 1999 program. Drake, 291 F.3d at 72. Hence, we
hold that the district court had jurisdiction of Milk Train's
base-year challenge.
B.
Milk Train's base-year challenge to the Secretary's regula-
tions has two prongs, both of which are founded on the
premise that there is no statutory basis for the use of 1997
and 1998 production data for calculating 1999 losses and on
the dilution of 1999 moneys. The 2000 Appropriations Act
requires that the moneys are to be used to reimburse dairy
producers for "economic losses incurred during 1999." 2000
Appropriations Act s 805. Milk Train contends that "the
Secretary did not compensate producers for their 1999 eco-
nomic losses but, instead, used the same time period and
formula used to compensate for 1998 market losses--losses
for which producers had already been paid once." Conse-
quently, the moneys available to producers (such as appel-
lants) who were eligible were diluted. There are two prongs
to Milk Train's base-year challenge, for the 1999 funds were
diluted, it maintains, either (1) because some producers who
received 1999 program moneys were not in business in 1999
(and thus suffered no losses) or (2) because some producers
were paid at a higher rate per cwt on 1997 or 1998 production
based on the earlier 1998 program.
Even though presented as a part of its challenge to the
26,000 cwt cap, Milk Train's base-year argument appears
throughout this case and is not the type of "asserted but
unanalyzed" contention that the court should not address; the
Secretary received fair notice of the argument and had an
opportunity to respond. See SEC v. Banner Fund Int'l, 211
F.3d 602, 613 (D.C. Cir. 2000) (quoting Carducci v. Regan,
714 F.2d 171, 177 (D.C. Cir. 1983)); cf. Singleton v. Wulff, 428
U.S. 106, 120-21 (1976). During the hearing on the cross-
motions for summary judgment the district court sought the
Secretary's response to Milk Train's base-year argument, and
the Secretary responded that:
[w]hen the payments were made [for the 1998 program]
the most recent figures that were available for produc-
tion were the '97 and '98 years. When payments were
made under the [1999] program, the easiest and quickest
thing to do administratively was to use the same produc-
tion figures for existing farmers and allow new farmers
to file new applications....
Again on appeal, the Secretary presents an administrative
efficiency response but also explains that "the use of 1997 or
1998 production quantity information as the basis for calculat-
ing payment amounts does not constitute a payment based on
losses incurred during those years. Rather, the Secretary
merely used those figures to allocate a limited pool of mon-
ey...." Appellee's Br. at 21. Accordingly, we proceed to
address the merits of Milk Train's base-year challenge.
Our review of the grant of summary judgment is de novo.
Milk Indus. Found. v. Glickman, 132 F.3d 1467, 1473 (D.C.
Cir. 1998). In addressing Milk Train's challenge to the
Secretary's choice of a base year as contrary to law under the
APA, the court accords special deference to the Secretary's
interpretation of a statute that Congress has authorized the
Secretary to implement. See ABF Freight Sys., Inc. v.
NLRB, 510 U.S. 317, 324 (1994); Schweiker v. Gray Pan-
thers, 453 U.S. 34, 44 (1981). So long as the regulations
reflect a permissible interpretation of the statute, the court
owes deference to the Secretary. See Transitional Hosps.
Corp. of La. v. Shalala, 222 F.3d 1019, 1025 (D.C. Cir. 2000)
(citing Chevron U.S.A., Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837, 843-44 (1984)). The court likewise owes
deference to the Secretary's interpretation of her regulations.
Udall v. Tallman, 380 U.S. 1, 16 (1965) It remains incumbent
upon the Secretary to explain as part of the regulatory
proceedings how the chosen manner of distributing the mon-
eys extends only to the losses covered by the statute or risk
vacation of the rule. See Int'l Union, United Mine Workers
v. Fed. Mine Safety & Health Admin., 920 F.2d 960, 966-67
(D.C. Cir. 1990); see also Checkosky v. SEC, 23 F.3d 452, 463
(D.C. Cir. 1994) (separate opinion of Silberman, J.).
We begin with the shared assumption of the parties, as
stated in Milk Train's brief, that "[t]he simple and logical
approach to compensating for economic losses incurred in
1999 would be to pay producers a fixed amount per hundred-
weight on all of their 1999 production--the same production
impacted by lower BFP [basic formula price] prices." Appel-
lant's Br. at 11; see Appellee's Br. at 13. Because the
economic losses to producers in 1999 were due primarily to
the collapse of milk prices in 1999, tying the level of payments
to a dairy operation's level of production seems a reasonable
conclusion by the Secretary, and Milk Train does not chal-
lenge it. Indeed FSA's cost-benefit analysis indicates that in
October 1999 manufacturing milk prices suffered the second
largest month-to-month drop, that the November 1999 basic
formula price was the lowest in 21 years, and that prices were
expected to remain low throughout FY 2000 at over 20% less
than the record high level of FY 1999. Anticipating that the
assistance provided by the 1999 program "will offset only a
modest portion of the expected decline in dairy producers[']
incomes as prices decline," the assessment added that the
number of commercial dairy operations declined about 4.2%
between July 1998 and July 1999.
The record indicates that the Secretary did consider requir-
ing producers who had received payments under the 1998
program to reapply for compensation from the 1999 program.
A decision memorandum prepared for the Secretary agreed
that such a system would "target 1999 production," but
concluded that such a system would significantly delay pay-
ments to producers, place additional workload on agency field
offices, and require additional resources to develop new com-
puter software to handle the new program. The decision
memorandum also discussed using only the lists of producers
who had participated in the 1998 program (including the data
for their 1997 or 1998 levels of production) to determine
eligibility and payment levels for the 1999 program. Such an
approach would greatly reduce administrative costs and the
time required to provide payments to producers, but, accord-
ing to the decision memorandum, "the payments distributed
under the previous [1998] program will not reflect current
operations" and new operations in 1999 would be unable to
take advantage of the funding for 1999 losses. Instead, the
Secretary chose the approach whereby the eligibility and
payment levels for the 1999 program for all producers who
had already participated in the 1998 program were to be
determined from the 1997 or 1998 data used in the 1998
program. 65 Fed. Reg. at 7945. For those who had failed to
participate in the 1998 program, they could apply, provided
they had production in the fourth quarter of 1998, with the
basis for establishing payment amounts being the higher of
1997 or 1998 production levels. For producers who had
begun production in 1999, new applications with 1999 data
could be submitted. This approach was preferable, the deci-
sion memorandum concluded, because it would allow new
producers to participate in the program, while minimizing the
administrative costs and time required for implementing the
program with respect to the vast majority of dairy producers.
In selecting this approach, the Secretary considered the
risk that the use of 1997-98 production data would inaccurate-
ly measure the level of 1999 production (and therefore, the
level of 1999 economic losses), and concluded that the benefit
of increased accuracy was not worth the additional delay in
distributing funds and the administrative costs. The FSA
cost-benefit assessment stated that it could be expected that
"about 1.5 percent of the recipients of the [1999 program
moneys] would not have been in operation in 1999" but
concluded that "[t]he chance of including operations in the
[1999] program which did not farm in 1999 was not great
enough to justify requiring 76,771 operations to re-enroll."
The parties agree that production levels are an appropriate
proxy for economic losses. Based on the parties' agreeemnt
and the above analysis, it would appear to follow that the
Secretary could reasonably conclude, in light of the dramatic
drop of milk prices in 1999, that all milk producers would
suffer economic losses in 1999 and consequently measuring
production was a reasonable way to measure economic losses.
As the Secretary explains in her brief, under the circum-
stances, use of the 1997 or 1998 production data was an
efficient way to allocate limited moneys promptly.
The analysis underlying the Secretary's approach using
1997 and 1998 production data is logically sound, for any
measurement by the Secretary of the amount of 1999 produc-
tion would be subject to some level of uncertainty because of
measurement errors and incomplete reporting. The trade-off
between the amount of uncertainty and error that is accept-
able in view of the congressional purpose to get aid promptly
to milk producers, see 2000 Appropriations Act s 824(a), and
the considerable time and money that the Agriculture Depart-
ment would have to expend to reduce that uncertainty and
error, is the type of issue for which courts show great
deference. An agency "typically has wide latitude in deter-
mining the extent of data-gathering necessary to solve a
problem." Allied Local & Reg'l Mfrs. Caucus v. U.S. Envtl.
Prot. Agency, 215 F.3d 61, 71 (D.C. Cir. 2000) (quotation
omitted), cert. denied 532 U.S. 1018 (2001); see also Nat'l
Ass'n of Mfrs. v. United States Dep't of Interior, 134 F.3d
1095, 1108 (D.C. Cir. 1998). The Secretary's explanation of
her approach using prior-year production data is sufficiently
clear in light of the FSA cost-benefit analysis and the decision
memorandum on options for payment that "the agency's path
may reasonably be discerned." Pub. Citizen, Inc. v. FAA,
988 F.2d 186, 197 (D.C. Cir. 1993) (quoting Bowman Transp.,
Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286
(1974)). Thus, the first prong of Milk Train's base-year
challenge--to use of prior-year production data--fails.
The second prong of Milk Train's base-year challenge is
more problematic for the Secretary. Here, Milk Train con-
tends, some producers were paid at a higher rate per cwt on
1997 and 1998 production based on the 1998 program. Based
on Milk Train's contention and our review of the record, it
appears that even if the Secretary's approach to the use of
prior-year production data was otherwise reasonable, the
Secretary did not apply it consistently. As pointed out by
Milk Train, the Secretary, in interpreting the regulations, did
not simply use the 1997 and 1998 data to estimate 1999 levels
of production and thus 1999 economic losses. Instead, in
providing guidance for implementation of the 1999 program,
the Secretary apparently instructed field offices to use the
1997 and 1998 data to allow dairy producers to collect funds
from the 1999 program as compensation for losses in 1997
and 1998. Specifically, the Secretary instructed those offices
to accept applications from dairy producers who had not
received funds under the 1998 program but had been in
operation in the last quarter of 1998 (whether or not they
were in production in 1999). The Secretary further instruct-
ed those offices that "[p]roducers who did not receive pay-
ments under the initial [i.e., 1998] program will receive a
payment calculated at the initial [i.e., 1998] payment rate."
The language in the 2000 Appropriations Act indicates that
Congress was not simply adding funds to a pool of money
that it had appropriated the prior year so any losses occur-
ring from the start of the 1998 program through the end of
the 1999 program would be eligible for payment out of the
pool that included the 1999 moneys; rather, Congress limited
the moneys designated for dairy producers in the 2000 Appro-
priations Act to payment of "economic losses occurring during
1999." 2000 Appropriations Act s 805. Yet the Secretary's
interpretation of the regulations, as shown by the Secretary's
implementing guidance, appears to authorize the use of 1999
moneys to pay for non-1999 economic losses in addition to
1999 losses. It may well be that the Secretary's guidance
was intended merely to instruct that for those dairy produc-
ers who did not participate in the 1998 program a greater
proportion of their 1999 losses would be compensated under
the 1999 program. If this is what the Secretary intended, as
is suggested by the Secretary's argument in her brief that
reliance on prior-year data was merely an allocation tool that
did not result in payment of non-1999 losses out of 1999
funds, then the implementing guidance involves the manner
of distribution over which the court has no jurisdiction to
review. See supra Part IIA. But as the administrative
record now stands, the court is unable to determine whether
the Secretary's interpretation of the regulations was inconsis-
tent with the plain language of the 2000 Appropriations Act,
and as such, contrary to law. Cf. FPC v. Texaco, Inc., 417
U.S. 380, 395-96 (1974).
C.
The decision whether to remand or vacate "depends on [1]
the seriousness of the order's deficiencies (and thus the
extent of doubt whether the agency chose correctly) and [2]
the disruptive consequences of an interim change that may
itself be changed." Allied-Signal Inc. v. United States Nu-
clear Regulatory Comm'n, 988 F.2d 146, 150-51 (D.C. Cir.
1993) (quoting Int'l Union, United Mine Workers, 920 F.2d
960, 967); see County of Los Angeles v. Shalala, 192 F.3d
1005, 1023 (D.C. Cir. 1999); Radio-Television News Dirs.
Ass'n v. FCC, 184 F.3d 872, 887-89 (D.C. Cir. 1999); Checko-
sky, 23 F.3d at 462-66 (separate opinion of Silberman, J.)
While the deficiency in the regulations arising from the
Secretary's interpretation is not insignificant insofar as it may
have resulted in use of 1999 moneys to pay for economic
losses not incurred during 1999, this second prong of Milk
Train's base year challenge was not its most prominent
argument. In our view, there is at least "a serious possibili-
ty" that the Secretary on remand could explain her use of the
1999 funds in a manner that is consistent with the statute or
choose an allocation method to correct the problem, a factor
that favors remanding rather than vacating. See Allied-
Signal, 988 F.2d at 151. Moreover, Milk Train's request for
a remand for a new rulemaking ignores the second prong of
the Allied-Signal test. As in Sugar Cane Growers Coop. v.
Veneman, 289 F.3d 89 (D.C. Cir. 2002), where the Secretary
had improperly disbursed large quantities of sugar to farmers
across the country, who in turn had already plowed under
their crops, the Secretary here has already disbursed the
1999 program moneys to numerous dairy producers through-
out the country, and those moneys may not be recoverable
three years later. Here, as there, "[t]he egg has been
scrambled and there is no apparent way to restore the status
quo ante." Id. at 97.
Therefore, as in County of Los Angeles, where the court
similarly found the Secretary's explanation for using prior-
year data in a rulemaking procedure inconsistent, we con-
clude that a remand is the appropriate course. 192 F.3d at
1023. The court, of course, expresses no opinion on what
might be a permissible manner of allocation based other than
on production data. Our remand does not bind the agency to
its current reasoning, approach, or decision. Southeastern
Mich. Gas Co. v. FERC, 133 F.3d 34, 38 (D.C. Cir. 1998).
Accordingly, we vacate that portion of the district court's
opinion that discusses the Secretary's use of a 26,000 cwt cap
for lack of jurisdiction, and we reverse the grant of summary
judgment and remand the case to the district court with
instructions to remand to the Secretary, in light of the
inconsistent application of the Secretary's approach for using
1997 and 1998 production data to allocate 1999 moneys.
Sentelle, Circuit Judge, dissenting: While I agree with
much of what the majority has to say, ultimately I would
reach a different result for somewhat different reasons. I
will not bother to rehash the facts well stated by the majority,
but instead, I must say that I find the Secretary's blatant use
of 1998 losses to disburse funds appropriated by Congress
"for economic losses incurred during 1999" unworthy of the
elaborate defense offered by the majority. As the majority
recognizes, the Secretary is empowered "to compensate pro-
ducers for economic losses incurred during 1999." 2000
Appropriations Act s 805. The Secretary advanced a formu-
la compensating dairy farmers for production during 1997 or
1998. I would not defer to that decision. Granted, Chevron
U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467
U.S. 837 (1984), requires us to defer in appropriate cases to
an agency's choice "based on a permissible construction of the
statute." Id. at 843. However, that deference is called down
only when "the statute is silent or ambiguous with respect to
the specific issue." Id. I find no ambiguity in the term
"1999" that would permit it to be construed as meaning
"1998." I therefore would get off at the first step of Chevron:
"If the intent of Congress is clear, that is the end of the
matter; for the court, as well as the agency, must give effect
to the unambiguously expressed intent of Congress." Id. at
842-43.
By way of examples of the operation of the Secretary's
complex departure from an unambiguous congressional in-
struction, if a milk producer operated a dairy in 1997 and
through the first week of October in 1998, and thereupon
ceased production, he would have incurred no loss in 1999.
Under the unambiguous instruction of Congress, he would be
entitled to no compensation from the fund at issue. Under
the Secretary's application, he would receive compensation
based on his production in 1997. Another producer, having
suffered difficulties in 1997 and 1998 resulting in reduced
milk production but having restored her herd to full produc-
ing potential in 1999, would likely have suffered compensable
losses in 1999, given the market situation data relied upon by
the Secretary. However, any compensation she received
would be based not upon her 1999 losses, but upon a figure
derived from a presumptive loss incurred based on her 1997
and 1998 reduced milk production, and presumably a lower
figure than that to which she would be entitled for 1999. The
Secretary admits that this methodology will admit into the
pool of eligible applicants for a limited fund some number of
dairy producers who no longer produced milk in the calendar
year stated in the statute. Given that it is a fixed and limited
fund, this inevitably reduces the amount available for distri-
bution to producers eligible under the statutory criterion.
The majority accepts as a reasonable explanation the elabo-
rate interpretation that using 1997 or 1998 levels of produc-
tion to determine payments was really an efficient method of
paying for losses in 1999. Assuming without conceding the
reasonableness of the explanation proffered, I would reject it
in any event. The analysis finds little basis in the administra-
tive record, but is largely a product of the appellate brief
cited by the majority in support of the reasonableness of the
explanation. "We do not generally give credence to such post
hoc rationalizations, but rather 'consider only the regulatory
rationale actually offered by the agency during the develop-
ment of the regulation.' " Gerber v. Norton, 294 F.3d 173,
184 (D.C. Cir. 2002) (quoting Grand Canyon Air Tour Coali-
tion v. FAA, 154 F.3d 455, 469 (D.C. Cir. 1998)). I would
apply our normal rule and reject the post hoc explanation
advanced by the Secretary's appellate counsel and refined by
the majority today.
Having determined that I would reject the Secretary's
compensation scheme, I, like the majority, am left with the
question of what remedy is then appropriate. Once again I
part company with the majority. I would not simply remand,
but would vacate. In my view, "[o]nce a reviewing court
determines that the agency has not adequately explained its
decision, the Administrative Procedure Act requires the
court--in the absence of any contrary statute--to vacate the
agency's action." Checkosky v. SEC, 23 F.3d 452, 491 (D.C.
Cir. 1994) (Randolph, J., concurring). As Judge Randolph
noted in his opinion in Checkosky, the APA states as much "in
the clearest possible terms. [The Act] provides that a 'review-
ing court' faced with an arbitrary and capricious decision
'shall ... hold unlawful and set aside' the agency action." Id.(quoting 5 U.S.C. s 706(2)(A)).
Granted, cases such as County of Los Angeles v. Shalala,
192 F.3d 1005 (D.C. Cir. 1999), provide precedent for the
authority of the court to remand without vacating, as the
majority holds today. Nonetheless, even if we are empow-
ered to depart from the literal command of the language--a
proposition which in the absence of such precedent I would
find surprising--I think it often, if not ordinarily, unwise.
Heckler v. Chaney, 470 U.S. 821 (1985), among many other
cases, establishes the proposition that courts are not to
substitute their administrative judgments for those of the
agency. Any time that the agency has not adequately justi-
fied its decision, we do not know what the agency's decision
would have been had it subjected the questions before it to
the lawful administrative process. Therefore, when we hold
that the conclusion heretofore improperly reached should
remain in effect, we are substituting our decision of an
appropriate resolution for that of the agency to whom the
proposition was legislatively entrusted. I therefore cannot
concur.
For a similar reason, I would vacate not only the use of the
wrong annual losses for the determination of the amount of
relief offered, but the regulation in its entirety, including the
limitation of compensation to 26,000 cwt of production.
Granted, the Secretary and the majority make out a good
case for the unreviewability of that element of decision. Had
that question come to us unaccompanied by the primary issue
upon which I would vacate, I likely would have joined the
majority's decision that it is unreviewable. But, as the Su-
preme Court reminded us in Heckler v. Chaney, as relied
upon by the majority, the decisions of the agency involve a
" 'complicated balancing of a number of factors which are
peculiarly within [an agency's] expertise.' " Maj. Op. at 6
(quoting Heckler v. Chaney, 470 U.S. at 831). Since I would
vacate the unauthorized year, I am unable to ascertain wheth-
er the agency would have employed the same production cap
had it used the right production year, and therefore I would
be left with no choice but to remand this case to the district
court for an order vacating the Secretary's decision and
remanding the matter to the Secretary for further proceed-
ings applying the correct statutory allocation.
Although I greatly respect the majority's attempt to save a
well-intended relief program from possibly inefficient further
proceedings, I do not think we can lawfully do so. I therefore
most respectfully dissent.