Org. for Competitive Mkts. v. U.S. Dep't of Agric.

912 F.3d 455

ORGANIZATION FOR COMPETITIVE MARKETS, et al., Petitioners

v.U.S. DEPARTMENT OF AGRICULTURE, et al., Respondents

No. 17-3723

United States Court of Appeals, Eighth Circuit.

Submitted: September 26, 2018

Filed: December 21, 2018

Counsel who filed a brief and presented argument on behalf of the petitioner was Karianne M. Jones, Democracy Forward Foundation, Washington, DC. Also appearing on the brief were Javier M. Guzman and Adam Grogg, Washington, DC.

Counsel who filed a brief and presented argument on behalf of the respondent was Weili J. Shaw, U.S. Department of Justice, Washington, DC. Also appearing on the brief was Mark Stern.

Before LOKEN, BENTON, and SHEPHERD, Circuit Judges.

LOKEN, Circuit Judge.

The Organization for Competitive Markets and three of its members petition for review of 2017 United States Department of Agriculture ("USDA") orders withdrawing an interim final rule and two proposed regulations promulgated under the Packers and Stockyards Act ("PSA"), 7 U.S.C. §§ 181 et seq. We deny the petition for review.

I. Background.

The PSA was enacted in 1921 to comprehensively regulate the "Big Five" meat packers, stockyards they controlled, and commission men and dealers who profited from their nationwide monopoly. See Stafford v. Wallace, 258 U.S. 495, 514-16, 42 S.Ct. 397, 66 L.Ed. 735 (1922) (rejecting a Commerce Clause challenge to the PSA). Modeled after the Interstate Commerce Act of 1887 and the Federal Trade Commission Act of 1913, two core PSA provisions make it unlawful for any packer, swine contractor, or live poultry dealer to "use any unfair, unjustly discriminatory, or deceptive practice" or "give any undue or unreasonable preference or advantage to any particular person or locality in any respect." PSA § 202(a) and (b), codified at 7 U.S.C. § 192(a) and (b).¹

Because "[r]ead literally, [these terms] establish no standard at all," at least six circuits, including this court, have concluded that these provisions concern only those business dealings that have an actual or potential adverse effect on competition, an interpretation based on "their statutory and common-law antecedents, which were known well by the Members of the Congress that passed the [PSA]." Wheeler v. Pilgrim's Pride Corp., 591 F.3d 355, 364-65 (5th Cir. 2009) (en banc) (Jones, J., concurring); accord Been v. O.K. Indus., Inc., 495 F.3d 1217, 1228-29 (10th Cir. 2007) ; London v. Fieldale Farms Corp., 410 F.3d 1295, 1303-04 (11th Cir. 2005) ; IBP, Inc. v. Glickman, 187 F.3d 974, 977 (8th Cir. 1999) ; De Jong Packing Co. v. USDA, 618 F.2d 1329, 1336-37 (9th Cir. 1980) ; Pac. Trading Co. v. Wilson & Co., Inc., 547 F.2d 367, 369-70 (7th Cir. 1976). Notably, Congress has amended the PSA at least seven times without making changes that would affect this judicial interpretation. Wheeler, 591 F.3d at 361. Though the USDA has consistently construed these provisions as not requiring proof of anti-competitive effect, courts have not given its position Chevron deference. See Wheeler, 591 F.3d at 362 ; Been, 495 F.3d at 1227 ; London, 410 F.3d at 1304.

On December 20, 2016 (the timing is significant), USDA published an interim final rule -- known as the Farmer Fair Practices Rules -- declaring that a finding of adverse effect on competition "is not necessary in all cases. Certain conduct or action can be found to violate sections 202(a) and/or (b) of the Act without a finding of harm or likely harm to competition." 81 Fed. Reg. at 92,566, 92,594, to be codified as 9 C.F.R. § 201.3(a). USDA explained that its longstanding interpretation of the PSA was correct but had been rejected by courts of appeals that misconstrued the statute. "To the extent that these courts failed to defer to USDA's interpretation of the statute because that interpretation had not previously been enshrined in a regulation, this new regulation may constitute a material change in circumstances that warrants judicial reexamination of the issue." Id. at 92,568 (footnotes omitted). USDA declared the interim final rule would take effect on February 21, 2017, and invited written comments before that date.

The same day, USDA published two proposed amendments to its PSA regulations: proposed 9 C.F.R. § 201.210 set forth a long list of "per se" violations of section 202(a), that is, conduct or action that is "unfair," "unjustly discriminatory," or a "deceptive" practice "regardless of whether the conduct or action harms or is likely to harm competition." Proposed 9 C.F.R. § 201.211 listed six non-exclusive criteria the Secretary will consider in determining whether section 202(b) has been violated, one of which is whether the conduct or action "harms or is likely to harm competition." 81 Fed. Reg. 92,703, 92,722 -23.

On February 7, 2017, citing a "Regulatory Freeze Pending Review" issued by the President's Chief of Staff to the heads of all executive departments, USDA postponed the interim final rule's effective date to April 22, 2017, and invited written comments. 82 Fed. Reg. 9,489 (Feb. 7, 2017). On April 12, noting "the significant public interest in this rule," USDA further postponed the rule's effective date to October 19, 2017, and issued a notice of proposed rulemaking seeking comments regarding four alternative dispositions. 82 Fed. Reg. 17,531 and 17,594 (Apr. 12, 2017). On October 18, USDA withdrew the interim final rule and published notice "that after review and careful consideration of the public comments received, [USDA] will take no further action" on proposed 9 C.F.R. §§ 201.210 and 201.211. 82 Fed. Reg. at 48,594 and 48,603 (Oct. 18, 2018). Petitioners argue that USDA's withdrawal of the interim final rule and failure to promulgate the proposed regulations were arbitrary and capricious agency actions within the meaning of 5 U.S.C. § 706(2)(A) and a continuing failure to comply with a mandate in the Food, Conservation, and Energy Act of 2008² that constitutes unlawful withholding of agency action under 5 U.S.C. § 706(1).

II. Discussion.

Viewed from a political scientist's perspective, this landscape is rather easy to describe. In December 2016, the outgoing USDA administrators left their successors a time bomb -- published proposed agency actions promulgating USDA's longstanding interpretation of the PSA that would increase its regulatory authority, an interpretation that had been consistently rejected by numerous courts of appeals for over 75 years, without congressional intervention. Not surprisingly, USDA's incoming Secretary, acting on a promise to reduce regulation, took action to postpone and then cancel these proposals. In ruling on this petition for review, our task is limited to applying established, neutral legal principles to determine whether that was valid agency action. Whether prior court of appeals decisions have correctly interpreted the PSA is a task for the Supreme Court, or for each of those courts acting en banc. Whether the PSA should be amended to reflect USDA's view of what it ought to provide is the task of Congress.³

A. The Arbitrary and Capricious Issue. The Administrative Procedure Act provides for judicial review of most agency actions. 5 U.S.C. §§ 701 - 706. The parties agree those provisions apply to the USDA actions at issue. Section 706(2)(A) provides that a 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." This is a highly deferential standard: "Under what we have called this ‘narrow’ standard of review, we insist that an agency ‘examine the relevant data and articulate a satisfactory explanation for its action.’ " FCC v. Fox Television Stations, Inc., 556 U.S. 502, 513, 129 S.Ct. 1800, 173 L.Ed.2d 738 (2009), quoting Motor Vehicle Mfrs. Ass'n of U.S., Inc., v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983). "If an agency's determination is supportable on any rational basis, we must uphold it." Voyageurs Nat'l Park Ass'n v. Norton, 381 F.3d 759, 763 (8th Cir. 2004). This standard applies when an agency revokes an extant regulation.

In this case, USDA published a proposed interim final rule and two regulations that reflected its prior enforcement policy but enshrined that policy in regulations, a change of course that had not been subjected to full notice and comment rulemaking. The proposals never took effect. Rather, in the actions at issue, USDA withdrew the proposed regulatory change while leaving its prior enforcement policy unaffected. Judicial review of this kind of action "present[s] questions that are delicate, subtle, and complex." Fox Television, 556 U.S. at 536, 129 S.Ct. 1800 (Kennedy, J., concurring). "The question in each case is whether the agency's reasons for the change [or decision not to change], when viewed in light of the data available to it, and when informed by the experience and expertise of the agency, suffice to demonstrate that the new policy rests upon principles that are rational, neutral, and in accord with the agency's proper understanding of its authority." Id. In general, "an agency's discretion is surely at its height when it chooses not to act." Williams Nat. Gas Co. v. FERC, 872 F.2d 438, 450 (D.C. Cir. 1989) (emphasis in original). But "an agency changing its course by rescinding a rule is obligated to supply a reasoned analysis for the change beyond that which may be required when an agency does not act in the first instance." Motor Vehicle Mfrs., 463 U.S. at 42, 103 S.Ct. 2856.

In its published comment withdrawing the interim final rule, USDA reviewed in detail the public comments for and against the rule⁴ and offered two main justifications for its decision to withdraw. First, surveying at length prior decisions of seven courts of appeals regarding the need to show harm to competition, 82 Fed. Reg. at 48,596 -98, USDA concluded that the interim final rule would conflict with decisions in...