Summary of a Recent
Judicial Development in
Administrative Law

NAD Director's Determination Was Arbitrary and Capricious, Requiring Reversal

Walt McCarter
National AgLaw Center Research Associate

Summary of Decision

In Cleary v. United States Department of Agriculture, No. 07-11940, 2008 WL 4427533 (E.D. Mich. Sept. 30, 2008), the United States District Court for the Eastern District of Michigan reversed a determination by the Director of the USDA National Appeals Division (NAD) and reinstated the prior determination made by an NAD hearing officer because the Director's "highly flawed and result-oriented reversal of the hearing officer was grounded in a distortion of the record [and] was arbitrary and capricious."

Background

Plaintiff signed a contract to participate in a Sugar Payment-In-Kind (PIK) Diversion Program, but Farm Service Agency (FSA) later determined that he had violated the terms of the contract by improperly harvesting sugar beets. Id. at *2. Plaintiff appealed to the NAD and a hearing officer overturned the FSA's determination, but the NAD Director reversed the appeal determination without considering the plaintiff's response, so the plaintiff appealed again. Id. at *3. The Director's determination was affirmed by the Deputy Director, and the plaintiff appealed to the state court. Id.

Arguments

Plaintiff argued that the Director's decision was invalidated by his failure to reconsider, that the Director had ignored exculpatory material within the FSA's own records and impermissibly overlooked FSA's lack of evidence, that the Director erred by questioning the hearing officer's credibility determination, and that the review was further tainted by erroneous and unsupported findings of fact. Id.

Analysis and Holdings

The court found that substantial evidence did not support the Director's review or the Deputy Director's reconsideration, and that the Director's failure to consider the plaintiff's response before overturning the hearing officer's determination constituted a "clear procedural error" and thus invalidated his findings. Id. at *5. The Director "will conduct a review of the determination of the Hearing Officer using the agency record, the hearing record, the request for review [and] any responses" pursuant to 7 C.F.R. § 11.9(d). Id. The court noted that this constituted a substantive error also, as 7 U.S.C. § 6997(b) provides that a plaintiff appealing an agency determination to the NAD is entitled to an evidentiary hearing. Id. The court further found that the Director had unreasonably discounted the hearing officer's credibility determination, and that he had failed to consider critical evidence supporting the hearing officer's finding. Id. at *6-7. The court concluded that the Director's procedural error, coupled with erroneous factual conclusions, rendered the final administrative determination arbitrary and capricious, and therefore reinstated the appeal determination. Id. at *9-10.

The case was decided on September 30, 2008.