Summary of a Recent
Judicial Development in
Federal Crop Insurance

Peanut Farmers' Claims Dismissed for Lack of
Subject Matter Jurisdiction

Harrison M. Pittman
Staff Attorney

Summary of Decision

In Texas Peanut Farmers v. United States, 409 F.3d 1370 (Fed. Cir. 2005), the United States Court of Appeals for the Federal Circuit dismissed an action brought by several peanut farmers for lack of subject matter jurisdiction.

Background

Multiple Peril Crop Insurance (MPCI) policies are crop insurance policies that are issued by private insurers and reinsured by the Federal Crop Insurance Corporation (FCIC) for protection against weather-related crop losses. See Texas Peanut Farmers, 409 F.3d at 1370. Prior to 2002, MPCI coverage for peanuts was based upon whether lost peanut crops were considered "quota" or "non-quota." See id. at 1372. Quota peanuts were covered at $0.31 per pound and non-quota peanuts were covered at $0.16 per pound. See id. The Farm Security and Rural Investment Act of 2002, commonly referred to as the 2002 Farm Bill, repealed the peanut quota "and caused all peanuts to become non-quota with a per-pound-coverage rate of $0.1775." Id.

Several peanut farmers from South Carolina, Georgia, Alabama, Texas, and Florida purchased MPCI coverage for their 2001 and 2002 peanut crops. See id. After the farmers' peanut crops suffered weather-related damage in 2002, they filed claims for their losses in accordance with their MPCI policies, expecting that their losses would be covered at $0.31 per pound. See id. They were informed, however, that due to the repeal of the peanut quota by the 2002 Farm Bill their losses would only be covered at $0.1775 per pound. See id.

The farmers brought a breach of contract action against the United States in the United States Court of Federal Claims for breach of contract and argued that their damages equaled the difference between the $0.31 per-pound and $0.1775 per-pound-coverage rates. See id. The Court of Federal Claims dismissed the farmers' claims for lack of jurisdiction, holding that 7 U.S.C. §§ 1508(j) and 1506(d) placed exclusive jurisdiction in the federal district courts. See id. See also Texas Peanut Farmers v. United States, 59 Fed. Cl. 70 (Fed. Cl. 2003). The farmers appealed that decision to the Federal Circuit. See id.

Arguments

The farmers argued that 7 U.S.C. §§ 1508(j) and 1506(d) did not apply because they did not name the FCIC as a defendant. See id. The farmers also argued that the Court of Federal Claims has concurrent jurisdiction with the federal district courts under the Tucker Act, 28 U.S.C. § 1491(a)(1), and the Little Tucker Act, 28 U.S.C. § 1346(a)(2).

Section 1508(j) provides that if a claim of loss is denied, "an action on the claim may be brought against the Corporation or Secretary only in the United States district court for the district in which the insured farm is located." 7 U.S.C. 1508(j). Section 1506(d) provides that the FCIC,

subject to the provisions of section 1508 (j) . . . , may sue and be sued in its corporate name . . . . The district courts of the United States, including the district courts of the District of Columbia and of any territory or possession, shall have exclusive original jurisdiction, without regard to the amount in controversy, of all suits brought by or against the Corporation. The Corporation may intervene in any court in any suit, action, or proceeding in which it has an interest. . . .

Id. at § 1506(d).

Analysis and Holdings

The court first considered the farmers' argument that 7 U.S.C. §§ 1508(j) and 1506(d) did not apply because the FCIC was not named as a defendant in their complaint. Texas Peanut Farmers, 409 F.3d 1370, 1372 (Fed. Cir. 2005). The court rejected the farmers' argument, stating that "[t]his theory does not bear scrutiny. It is well settled that this court ‘look[s] to the true nature of the action in determining the existence or not of jurisdiction.'" Id. (citation omitted). It added that "[a]n inspection of the contract and . . . pleadings reveals the true nature of this action: a suit against the FCIC for breach of the MPCI. . . . [The farmers'] strategic decision not to name the FCIC as a defendant is merely an attempt to avoid the strictures of the MPCI and sections 1508(j) and 1506(d).

The court also rejected the farmers' arguments that the Court of Federal Claims possessed jurisdiction concurrent with the federal district courts. See id. at 1373. The court explained that Congress is permitted to withdraw any grant of Tucker Act jurisdiction. See id. (citing Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1016-17 (1984); Wilson v. United States, 405 F.3d 1002 (Fed. Cir. 2005); and Massie v. United States, 166 F.3d 1184 (Fed. Cir. 1999)). The court concluded that because the farmers "are suing the FCIC for breach, sections 1508(j) and 1506(d), by which Congress has granted courts exclusive jurisdiction over claims against the FCIC, govern." Id.

The case was decided on May 31, 2005; this summary was posted July 26, 2005.