Michael Fullenkamp v. Ann M. Veneman, in her capacity as Secretary of the United States Department of…

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0294P (6th Cir.)
File Name: 04a0294p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
MICHAEL FULLENKAMP, et al.,
Plaintiffs-Appellants,
v.
ANN M. VENEMAN, in her
capacity as Secretary of the
United States Department of
Agriculture,
Defendant-Appellee.
X
-
-
-
->
,
-
-
-
-
-
-
N
No. 03-3731
Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 02-07431—Ann Aldrich, District Judge.
Argued: June 17, 2004
Decided and Filed: September 2, 2004
Before: DAUGHTREY, GIBBONS, and COOK, Circuit
Judges.
_________________
COUNSEL
ARGUED: Benjamin F. Yale, BENJAMIN F. YALE &
ASSOC. CO., Waynesfield, Ohio, for Appellants. Jeffrey
2 Fullenkamp, et al., v. Veneman No. 03-3731
Clair, UNITED STATES DEPARTMENT OF JUSTICE,
Washington, D.C., for Appellee. ON BRIEF: Benjamin F.
Yale, Ryan K. Miltner, Kristine H. Reed, BENJAMIN F.
YALE & ASSOC. CO., Waynesfield, Ohio, for Appellants.
Jeffrey Clair, UNITED STATES DEPARTMENT OF
JUSTICE, Washington, D.C., for Appellee.
_________________
OPINION
_________________
MARTHA CRAIG DAUGHTREY, Circuit Judge. The
plaintiffs in this case are dairy farmers who annually produce
over 2.4 million pounds of milk. They challenge the
regulations promulgated by the defendant Secretary of
Agriculture to implement the federal Milk Income Loss
Contract Program, 7 U.S.C. § 7982. When a producer signs
a contract to join the program, it begins receiving monthly
payments on the eligible milk it produces and, under the
statute’s transition rule, a lump-sum payment for eligible milk
it produced between December 1, 2001, and the month before
the contract was signed. The statute includes a limitation
restricting the quantity of milk upon which payment can be
made each fiscal year to 2.4 million pounds. The Department
of Agriculture regulations under attack here apply the
limitation to payments under the transition rule as well as to
the monthly payments. The district court found that the
statute did not unambiguously forbid the Secretary’s
interpretation of the statute and, moreover, that the
Secretary’s interpretation was reasonable. The court therefore
denied the plaintiffs’ motion for injunctive relief and granted
the Secretary’s motion to dismiss.
For the reasons set out below, we affirm.

-- 1 of 7 --

No. 03-3731 Fullenkamp, et al., v. Veneman 3
FACTUAL AND PROCEDURAL BACKGROUND
On May 13, 2002, President Bush signed into law the Farm
Security and Rural Investment Act of 2002, Pub. L. No. 107-
171, 116 Stat. 134 (2002), which, in § 1502, created an
income support program for dairy farmers that provides for
direct federal payments to milk producers when a specific
statutorily-prescribed price index falls below a certain level.
See id. at § 1502, codified at 7 U.S.C. § 7982. In order to
receive payments through the program, dairy farmers must
enter into a contract with the Secretary of Agriculture. Once
a dairy farmer has entered into a contract, the farmer is
eligible for two categories of payments: (1) monthly
payments on eligible production beginning the month the
farmer enters into the contract and ending September 30,
2005, see 7 U.S.C. § 7982(g); and (2) a retroactive, lump-sum
payment for production during the “transition” period
between December 2001 and the month in which the farmer
enters the contract. See § 7982(h). The statute does not
specify a month in which dairy farmers must enter contracts,
just that the Secretary must offer such contracts from July
2002 until September 2005. See 7 U.S.C. § 7982(f).
Section 7982 reads, in pertinent part:
(b) Payments. The Secretary shall offer to enter into
contracts with producers on a dairy farm located in a
participating State under which the producers receive
payments on eligible production.
* * * * *
(d) Payment quantity.
(1) In general. Subject to paragraph (2), the payment
quantity for a porducer during the applicable month
under this section shall be equal to the quantity of
eligible production marketed by the producer during the
month.
4 Fullenkamp, et al., v. Veneman No. 03-3731
(2) Limitation. The payment quantity for all
producers on a single dairy operation during the months
of the applicable fiscal year for which the producers
receive payments under subsection (b) shall not exceed
2,400,000 pounds. . . .
* * * * *
(f) Signup. The Secretary shall offer to enter into
contracts under this section during the period beginning
on the date that is 60 days after the date of enactment of
this Act [May 13, 2002], and ending on September 30,
2005.
* * * * *
(h) Transition rule. In addition to any payment that is
otherwise available under this section, if the producers on
a dairy farm enter into a contract under this section, the
Secretary shall make a payment in accordance with the
formula specified in subsection ( c) on the quantity of
eligible production of the producer marketed during the
period beginning on December 1, 2001, and ending on
the last day of the month preceding the month the
producers on the dairy farm entered into the contract.
In October 2002, the Secretary of Agriculture issued
regulations implementing the dairy assistance program.
Under the regulations, the cap in § 7982(d)(2) limiting
payment quantity to 2.4 million pounds of milk per year was
made applicable to transition period payments under
§ 7982(h), as well as to the monthly payments for milk
produced after a contract has been signed. See 7 C.F.R.
§§ 1430.207(b). In response, the plaintiffs filed this action,
seeking a declaratory judgement that dairy producers who are
entitled to payments during the transition period are entitled
to a lump-sum payment on all the milk produced and
marketed during the transition period, not just 2.4 million
pounds a year. They requested an injunction compelling the

-- 2 of 7 --

No. 03-3731 Fullenkamp, et al., v. Veneman 5
1The defendant’s motion was styled a motion to dismiss under Rule
12(b)(1) of the Federal Rules of Civil Procedure or, in the alternative, for
summary judgment under Rule 56. The d istrict court said it was granting
the defendant’s motion to dismiss, but also made clear that it was
considering the case on the merits and not dismissing based on subject
matter jurisdiction. It therefore appears that it was either a dismissal for
failure to state a claim or a grant of summary judgment rather than a
dismissal for lack of subject matter jurisdiction. Even if the dismissal
were considered a dismissal for lack of subject matter jurisdiction, we can
affirm a district court’s judgment on any grounds supported by the record.
See Peterson Novelties, Inc. v. City of Berkley, 305 F.3d 38 6, 394 (6th Cir.
2002).
2Chevron deference is appropriate “when it appears that Congress
delegated authority to the agency generally to make rules carrying the
force of law, and that the agency interpretation claiming deference was
promulgated in the exercise of that authority.” United States v. Mead
Corp., 533 U.S. 218, 226-27 (2001) . In 7 U.S .C. § 7991(c), C ongress
authorized the Secretary and C omm odity C redit Corporation to
Secretary to modify the regulations at 7 C.F.R. § 1430 to
allow dairy producers uncapped transition payments.
The district court denied the plaintiffs’ motion for
injunctive relief and granted the Secretary’s motion to dismiss
the case.1 With respect to the cap on transition payments, the
court found that § 7982 does not unambiguously forbid the
regulations from making transition payments subject to the
cap and that the Secretary’s regulation was permissible and
reasonable. Applying Chevron deference, the court upheld
the Secretary’s determination that the cap applies to transition
payments as well as prospective payments under the contract.
See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837, 842-43 (1984). This appeal followed.
ANALYSIS
I. Standard of Review
The parties agree that Chevron, 467 U.S. 837, governs this
case.2 Under Chevron, in reviewing an agency’s
6 Fullenkamp, et al., v. Veneman No. 03-3731
promulgate appropriate regulations necessary to implement the chapter.
It specified that those regulations were to be made without regard to
notice and comment rule-making procedures. The regulations at issue in
this case, final regulations made without prior notice and comment, were
promulgated under the authority given to the Secretary in § 7991 (c). See
67 Fed. Reg. 64 454 (O ct. 18, 2002).
interpretation of a statute it administers, we must first ask
“whether Congress has directly spoken to the precise question
at issue.” Id. at 842. If, after “employing traditional tools of
statutory construction,” id. at 843 n.9, we determine that
Congress’s intent is clear, then “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.
However, “if the statute is silent or ambiguous with respect to
the specific issue, the question for the court is whether the
agency’s answer is based on a permissible construction of the
statute.” Id. at 843; see also Barnhart v. Thomas, 124 S.Ct.
376, 380 (2003) (applying Chevron).
II. The Application of the Cap to Transition Payments
Both the plaintiffs and the defendant in this case argue that
Congress spoke directly to the issue of whether the payment
cap in § 7982(d)(2) applies to transition payments.
Obviously, however, they do not agree on what Congress
said. The plaintiffs argue that Congress clearly intended that
the cap not apply to transition payments and that the
Secretary’s regulations therefore violate the statute. The
Secretary, on the other hand, contends that Congress clearly
intended that all payments under § 7982 would be limited by
the cap and that the Department’s regulations are consistent
with the statute. Both parties argue that the plain language of
the statute, legislative history, and the structure and purpose
of the statute support their positions.

-- 3 of 7 --

No. 03-3731 Fullenkamp, et al., v. Veneman 7
3Subsection (c), entitled “amount,” provides as follows:
Paym ents to a producer under this section shall be
calculated by multiplying (as determined by the Secretary) –
(1) the payment quantity for the producer during the
applicable month established under subsection (d);
(2) the amount equal to –
(A) $16.94 p er hundredweight; less
(B) the Class I milk price per hundredweight in Boston
under the applicable Federal milk marketing order; by
(3) 45 percent.
1. Statutory Language
In statutory construction cases, “[t]he first step ‘is to
determine whether the language at issue has a plain and
unambiguous meaning with regard to the particular dispute in
the case.’” Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438,
450 (2002) (citation omitted). The plaintiffs argue that the
plain language of § 7982 unambiguously requires the
Secretary to make transition payments without limitation.
They point out that subsection (h) requires payment on
eligible production and note that Congress did not limit the
definition of “eligible production” in either subsection (a) or
(h). They argue that if Congress had intended the cap to
apply to transitional payments, it could have written the
statute to say so in subsection (h) itself. As the Secretary
points out, however, subsection (h) provides that payments
shall be made according to the formula in subsection (c),3
which incorporates the payment quantity in subsection (d),
the subsection that includes the payment cap. Thus,
according to this reading of the statute, the fact that
subsection (h) itself does not include a limitation on quantity
is not determinative because the payment formula for which
it provides incorporates the payment cap in subsection (d)(2).
By its terms, however, the payment cap in subsection (d)(2)
applies only to “payments under subsection (b).” Thus, the
central question in this case is whether transition payments
are “payments under subsection (b),” the section of the statute
8 Fullenkamp, et al., v. Veneman No. 03-3731
4Subsection (g), entitled “duration of contract,” provides as follows:
(1) In general. Except as provided in paragraph (2) and
subsection (h), any contract entered into by producers on a
dairy farm under this section shall cover eligib le production
marketed by the producers on the dairy farm during the
period starting with the first day of [the] month the
producers on the dairy farm enter into the contract and
that orders the Secretary to offer to enter into contracts with
dairy farmers under which the farmers will receive payment
for eligible milk production. The plaintiffs assert that
transition payments are not payments under subsection (b).
They maintain that § 7982 creates two similar but distinct
programs that cover farmers during different periods – one,
described in subsection (e), that covers farmers during the
period after they sign contracts and another, described in
subsection (h), that covers farmers for the period before they
sign contracts – and that “payments under subsection (b)”
refers to the payments under the first program, not the second.
They argue that interpreting “payments under subsection (b)”
to include both transition and monthly payments renders the
phrase “subsection (b)” superfluous, since, under such an
interpretation, the limitation could have been written to just
read: “payments under this section.” As the plaintiffs point
out, however, citing to Director, Office of Workers’
Compensation Programs, United States Department of Labor
v. Goudy, 777 F.2d 1122, 1127 (6th Cir. 1985), statutes
should be read to give every word and clause effect. Citing
to other canons of statutory interpretation, the plaintiffs also
assert that the statute is remedial and should be construed
liberally in favor of the beneficiaries.
In response, the Secretary asserts that transition payments
are “payments under subsection (b).” She points out that
dairy farmers receive transitional payments only if they sign
contracts, as authorized in subsection (b). She further notes
that in excepting payments under subsection (h) from the
payments that start on the first day of the month in which the
contract is signed, subsection (g)4 contemplates that payments

-- 4 of 7 --

No. 03-3731 Fullenkamp, et al., v. Veneman 9
ending on September 30, 200 5 . . . .
under subsection (h) are payments covered by the contract.
She contends that if Congress had intended to limit the cap to
the monthly contract payments, it would have made more
sense to have the limit apply to “payments under subsections
(e)-(g),” the subsections dealing with the monthly payments,
rather than to “payments under subsection (b),” the subsection
discussing the contracts in general. Furthermore, the
Secretary questions whether the canons of statutory
interpretation cited by the plaintiffs are relevant here, arguing
that the program is not remedial and that the cap is an
eligibility limitation rather than an exception. Finally, she
contends that nothing in the structure or purpose of the statute
suggests that Congress intended to create two separate
programs or to distinguish between the retroactive transitional
payments and the prospective monthly payments.
Focusing on the statutory language, we conclude that it is
unclear whether the phrase “payments under subsection (b)”
includes transition payments or not. As the defendant points
out, transition payments are received only if the dairy farmers
enter into contracts and, therefore, such payments can be seen
to be payments under subsection (b). At the same time, as
noted by the plaintiffs, this interpretation does render the
phrase “subsection (b)” superfluous. Furthermore, when
subsection (e) refers to “a payment under a contract under this
section,” it is referring to the monthly payments, thereby
implying that transition payments are not considered
payments under § 7982 contracts. In short, we conclude that
although Congress may have had an intent regarding whether
transition payments were “under subsection (b) ,” that intent
is not stated clearly in the language of the statute.
2. Legislative History, Structure, and Purpose
Neither the legislative history of the statute nor the parties’
explanations of how their interpretations further the purpose
10 Fullenkamp, et al., v. Veneman No. 03-3731
of the statute sufficiently clarify the ambiguity in the statutory
language. See Gen. Dynamics Land Sys., Inc. v. Cline, 124
S.Ct. 1236, 1248 (2004) (looking to text, structure, purpose,
and history of Act to find it unambiguous); United States v.
Choice, 201 F.3d 837, 841 (6th Cir. 2000) (explaining that the
plain language of the statute is the starting point for statutory
interpretation, but that the structure and language of the
statute as a whole can aid in interpreting the plain meaning
and that legislative history can be looked to if the statutory
language is unclear).
Both parties are able to explain how their position fits into
the overall structure of the statute and furthers the statute’s
purpose. The Secretary asserts that her interpretation of the
statute gives the cap a meaningful role in the statute’s
operation, whereas the plaintiffs’ interpretation would largely
nullify the cap because large producers would be able to
circumvent the cap by waiting until September 2005 to sign
a contract and then receive “transitional payments” for the
entire period between December 2001 and August 2005.
The plaintiffs object to this argument and to the district
court’s acceptance of it, asserting that the district court and
Secretary have usurped the role of Congress and injected their
own political viewpoints into a carefully-crafted
congressional compromise. Furthermore, they argue,
Congress intended for large producers to be able to avoid the
production caps. They assert that the overall purpose of the
program was to assist dairy farmers and that Congress wanted
to cover all eligible production, but that it carefully
constructed the program in a way that would force large
farmers to wait until the end of the covered period if they
wanted to receive payments on all their eligible production in
order to refrain from encouraging large farmers to further
increase production and in order to push costs of the program
to later fiscal years.
Similarly, both parties cite legislative history that supports
their positions. The plaintiffs claim that the transition

-- 5 of 7 --

No. 03-3731 Fullenkamp, et al., v. Veneman 11
payments in § 7982 serve as a replacement for the Northeast
Dairy Compact, which did not have production caps. As the
Secretary points out, however, the Northeast Dairy Compact
was not a federal assistance program but an agreement among
Northeastern states to regulate prices. See Organic Cow,
LLC v. Ctr. for New England Dairy Compact Research, 335
F.3d 66, 67-68 (2d Cir. 2003) (describing the Compact). As
the Secretary further notes, previous programs supporting
dairy farmers included payment caps or gave discretion to the
Secretary, who then capped the amount of milk eligible for
assistance. See, e.g., Omnibus Consolidated and Emergency
Supplemental Appropriations Act, 1999, Pub. L No. 105-277,
§ 1111(d), 112 Stat. 2681 (1998) (providing $200 million to
provide assistance to dairy producers “in a manner
determined by the Secretary”); Dairy Market Loss Assistance
Program, 64 Fed. Reg. 24933 (May 10, 1999) (capping
payment to 2.6 million pounds). Similarly, both milk
assistance programs that were in the Farm Bill before it went
to conference included caps. See H.R. 2646, 107th Cong.
§ 132 (2002) (as amended and passed by Senate) (capping
payment at lesser of average quantity of milk in which farmer
had interest during each of a specified three-year period or 8
million pounds). In addition, the conference report does not
mention a difference between monthly and transition
payments with regard to the payment cap, simply noting, in
its description of the program, that: “Producers, on an
operation-by-operation basis, may receive payments on no
more than 2.4 million pounds of milk marketed per year.
Retroactive payments will be made covering market losses
due to low prices since December 1, 2001.” H.R. Conf. Rep.
No. 107-424 at 446 (2002), reprinted in 2002 U.S.C.C.A.N.
141, 171.
At the same time, the plaintiffs point out that some
members of Congress, particularly Senators Leahy and
Jeffords, indicated that they understood that the cap in § 7982
was to be applied to the monthly payments and not to
transition payments. Senator Leahy, for example, in
discussing the Farm Bill’s conference report, noted that:
12 Fullenkamp, et al., v. Veneman No. 03-3731
[T]he prospective “monthly” program which provides
monthly payments . . . has a 2.4 million pound cap as set
forth in (d). . . . This “limitations” language was inserted
out of a concern that an uncapped program would lead to
significant increases in production of milk. Also, there
was a concern that farmers would reorganize in the future
just to get higher payments under the national program.
These concerns do not apply to the benefits paid out
under subsection (h) because farmers would need time
machines to go back in the past and increase their
production or to change their legal structure
retrospectively. Indeed, the amount of production
covered by (h) is the amount of “eligible production” as
defined in section [7982(a)(2)].
148 Cong. Rec. S4032 (May 8, 2002) (statement of Sen.
Leahy).
In sum, looking at the statutory language, legislative
history, and overall structure and purpose of the statute, we
find the intention of Congress with regard to the application
of the subsection (d)(2) cap to transition payments unclear.
3. Reasonableness
Under Chevron, if Congress has not spoken directly to the
question at issue, the Secretary’s interpretation of the statute
will be upheld so long as it is reasonable. See Smiley v.
Citibank (S.D), N.A., 517 U.S. 735, 744-45 (1996) (“Since we
have concluded that the Comptroller's regulation deserves
deference, the question before us is not whether it represents
the best interpretation of the statute, but whether it represents
a reasonable one.”); see also Barnhart v. Thomas, 124 S.Ct.
at 382. In this instance, we conclude that the Secretary’s
interpretation of the statute is imminently reasonable. As
discussed above, transition payments pursuant to subsection
(h) could rationally be considered payments under subsection
(b), because they are contingent upon the recipients signing

-- 6 of 7 --

No. 03-3731 Fullenkamp, et al., v. Veneman 13
contracts authorized under subsection (b). Furthermore,
capping the transition payments along with the monthly
payments creates a consistency throughout the program and
ensures that the cap has a meaningful role in the statute.
CONCLUSION
For the reasons set out above, we find that the Secretary’s
construction of the statute was permissible, and we therefore
AFFIRM the judgment of the district court in favor of the
defendant.

-- 7 of 7 --