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Maple Drive Farms L.P. v. Vilsack

United States Court of Appeals, Sixth Circuit

April 1, 2015

MAPLE DRIVE FARMS LIMITED PARTNERSHIP, Plaintiff, NICHOLAS H. SMITH, Plaintiff-Appellant,
v.
TOM VILSACK, Secretary, United States Department of Agriculture, Defendant-Appellee

Argued October 10, 2013.

Appeal from the United States District Court for the Western District of Michigan at Grand Rapids. No. 1:11-cv-00692--Robert J. Jonker, District Judge.

ARGUED:

Bradley L. Smith, ENDURANCE LAW GROUP PLC, Jackson, Michigan, for Appellant.

Michael L. Shiparski, UNITED STATES ATTORNEY'S OFFICE, Grand Rapids, Michigan, for Appellee.

ON BRIEF:

Bradley L. Smith, ENDURANCE LAW GROUP PLC, Jackson, Michigan, for Appellant.

Michael L. Shiparski, UNITED STATES ATTORNEY'S OFFICE, Grand Rapids, Michigan, for Appellee.

Before: BOGGS and SUTTON, Circuit Judges; and CLELAND, District Judge.[*]

OPINION

Page 838

BOGGS, Circuit Judge.

The " Swampbuster" provisions of the Food Security Act of 1985 deny certain farm-program benefits to persons who convert a wetland on their property for agricultural purposes. Nicholas H. Smith challenges the United States Department of Agriculture's determination that Smith had converted 2.24 acres of wetland on his property and that he is, consequently, totally ineligible for program benefits. Specifically, Smith contends that the Department erred when it failed to: (1) analyze whether his purported conversion would have only a minimal effect on surrounding wetlands, a finding that would exempt him from ineligibility; (2) consider relevant factors that would reduce his penalties; and (3) exempt Smith's parcel on the ground that it was originally converted from wetland and farmed prior to the statute's passage. The district court denied relief. Because USDA acted without abiding by applicable regulations, we reverse the judgment of the district court and

Page 839

remand with instructions to remand to USDA for further proceedings consistent with this opinion.

I. Background

A. Statutory and Regulatory Background

The conservation title of the Food Security Act of 1985 denies agricultural benefits to farmers who convert wetlands or who farm converted wetlands. This regime, known as " Swampbuster," targets both farmers who " produc[e] an agricultural commodity on converted wetland," 16 U.S.C. § 3821(a), and those who " conver[t] a wetland by draining, dredging, filling, leveling, or any other means for the purpose, or to have the effect, of making the production of an agricultural commodity possible on such converted wetland," § 3821(d).[1]

The Act provides a number of exemptions from the ineligibility provisions. Relevant to this case are two exemptions. One, added to the Act in 1996, exempts farmers who convert:

A wetland previously identified as a converted wetland (if the original conversion of the wetland was commenced before December 23, 1985), but that the Secretary determines returned to wetland status after that date as a result of--
(i) the lack of maintenance of drainage, dikes, levees, or similar structures;
(ii) a lack of management of the lands containing the wetland; or
(iii) circumstances beyond the control of the person.

§ 3822(b)(2)(D); see Fed. Agric. Improvement & Reform Act of 1996, Pub. L. No. 104-127, § 322(b), 110 Stat. 888, 988--89 (1996). The second, contained in the original 1985 Act but significantly amended in 1990 and 1996, exempts farmers whose wetland conversion " will have a minimal effect on the functional hydrological and biological value of the wetlands in the area, including the value to waterfowl and wildlife." § 3822(f)(1); see Fed. Agric. Improvement & Reform Act of 1996, § 322(d), 110 Stat. at 990; Food, Agric., Conservation, & Trade Act of 1990, Pub. L. No. 101-624, § 1422, 104 Stat. 3359, 3574--75 (1990); Food Security Act of 1985, Pub. L. No. 99-198, § 1222(c), 99 Stat. 1354, 1508 (1985).

Even if a farmer does not qualify for these exemptions, the United States Department of Agriculture (USDA) retains discretion to reduce the ineligibility penalties for farmers who convert wetlands, in lieu of depriving those farmers of program benefits altogether. " Factors such as" the following " shall be considered [in] making this determination" :

the information that was available to the affected person prior to the violation, previous land use patterns, the existence of previous wetland violations under this part or under other Federal, State, or local wetland provisions, the wetland values, acreage, and functions affected, the recovery time for full mitigation of the wetland values, acreage, and functions,

Page 840

and the impact that a reduction in payments would have on the person's ability to repay a USDA farm loan.

7 C.F.R. § 12.4(c).

B. Factual Background

Nicholas H. Smith[2] owns a 50-acre field in Hillsdale County, Michigan. He has personally farmed the land for over fifty years. This case concerns a 2.24-acre parcel on the land.

1. Pre-2008 Activity on the Parcel

In November 1961, Smith and the Soil Conservation Service[3] formed an agreement, titled " Soil and Water Conservation Plan," under which the agency would assist Smith in executing a conservation plan for the property. In the agreement, Smith affirmed that he " want[ed] to farm the conservation way" and sought " assistance in working out, putting into effect and maintaining the conservation practices needed on [the] farm." The agency approved and helped finance a tile-drainage system to remove excess water and moisture from the 2.24-acre parcel on Smith's land.[4] In 1964, Smith installed drainage tile with cost-share funding from USDA's Agricultural Stabilization and Conservation Service.[5]

Smith, with the help of USDA, successfully drained the parcel and grew commodity crops on the parcel at least through 1982.[6] During this time, the Natural Resources Conservation Service (NRCS), an arm of USDA, provided Smith with technical assistance to implement the conservation plan. In the early 1980s, drainage through the parcel began to deteriorate, perhaps because of the drainage tile's collapse or blockage.

The administrative record contains annual aerial photos of the parcel from 1979 through 2003 and also for 2005. USDA states that these photos show both that, at least as early as 1979, the parcel had standing water and a consistent presence of woody overgrowth and also that the parcel's verdant nature differed from that of the surrounding cropland. The parties do not dispute that by 1985--the year that Congress enacted the Swampbuster provisions--the parcel had returned to a wetland condition. In June 1988, USDA determined that a wetland existed on Smith's property, and it informed Smith of this. In September 1993, USDA again determined that a wetland existed and again informed Smith.[7]

Page 841

In the 1980s and 1990s, Smith repeatedly attempted to repair the drainage tile. He was unsuccessful. In September 2008, Smith purchased a specialized backhoe to facilitate repairing the drainage tile.

2. Post-2007 Activity on the Parcel

On October 27, 2008, Smith filed an " AD-1026" form with USDA indicating his intent to " [c]reate new drainage systems, or conduct land leveling, filling, dredging, land clearing, or stump removal." Smith also indicated that his intent was not to modify " existing drainage" or to " maintain an existing drainage system." By signing this form, Smith agreed " [not] to convert wetlands" and to allow USDA to enter and inspect his farm.

On October 30, 2008, NRCS notified Smith that it designated the 2.24-acre parcel as a wetland.

On November 14, 2008, Smith requested that NRCS reconsider its determination and asked to set a date to meet with the district conservationist to discuss the issue. He informed NRCS that he had originally installed drainage tile and planted the parcel in the 1960s, and he offered to provide evidence. On November 22, 2008, Smith also requested to mediate the dispute.[8]

On November 25, 2008, G.L. Kinter, an NRCS investigator, conducted a wetland analysis on Smith's property. Kinter analyzed the vegetation, hydrology, and soils of the parcel at two different transects. The record also contains several photographs taken of Smith's property on November 25.[9]

The following day, on November 26, 2008, NRCS notified the Michigan Agricultural Mediation Program that it agreed to mediate the dispute with Smith. Subsequently, on December 12, 2008, NRCS issued a " final technical determination" that classified the 2.24-acre parcel as " manipulated wetland." On January 6, 2009, the Dispute Resolution Center of West Michigan notified Smith and NRCS that it would conduct a mediation session on January 28, 2009, at the Hillsdale County NRCS office.

On January 28, 2009, Smith and NRCS executed a mediation agreement. NRCS agreed to provide a wetland delineation and to provide Smith with advance notice of the date of the site visit to allow Smith to attend. NRCS also agreed to allow Smith to plant the field in the spring, so long as Smith did not remove trees.[10] Both parties agreed to keep mediation open pending completion of the wetland delineation. Gary Rinkenberger, the NRCS appeals and mediation coordinator for Michigan, signed the agreement on behalf of NRCS. The parties agree that on the following day, January 29, 2009, Smith spoke by phone with Jason Wheeler, the NRCS district conservationist, and Wheeler permitted Smith to cut down trees so

Page 842

long as Smith did not remove any stumps.[11]

Following the mediation session, Smith and NRCS exchanged correspondence to find a mutually agreeable date for NRCS to conduct the wetland delineation. In a March 23, 2009, letter, NRCS informed Smith that it would conduct the delineation on April 7, 2009. On March 28, 2009, Smith responded, stating that he would be out of state on that date; he indicated that he could accommodate a date after June 21, 2009. On April 9, 2009, NRCS proposed either June 22 or 23, 2009. On April 20, 2009, Smith agreed to a June 23, 2009, delineation.

That spring, prior to the NRCS wetland delineation, Smith farmed the parcel pursuant to the mediation agreement. Specifically, he cut down trees and mowed, plowed, tilled, and planted the land. He left stumps in place. In an area of the parcel that the parties refer to as the " northern neck," Smith also filled in a ditch. Smith believed that his alteration to the northern neck was permitted because it was not a wet spot, as it sat at a significantly higher elevation.

On June 23, 2009, NRCS returned to Smith's property, as agreed upon, to conduct the wetland delineation. William Bowman, an NRCS investigator and soil scientist, analyzed the vegetation, hydrology, and soils. On July 24, 2009, NRCS notified Smith that " accurate delineation of the wetland was not possible" because of significant alterations to the land since its prior site visit in November 2008. NRCS stated:

With the exception of some stumps from large trees that remain in the periphery of the wetland area, all woody vegetation within the wetland has been cleared and planted to a commodity crop. Additionally, there is evidence of the placement of fill in the north portion of the wetland, which has also been planted to a commodity crop.

Because Smith's activities resulted in " making production of a commodity crop possible, where it was not possible" previously, NRCS re-designated the parcel as " converted wetlands." NRCS did not claim that Smith removed stumps or otherwise violated the January 28, 2009, mediation agreement. Nor did it reference the clause in the mediation agreement that stated: " the field involved can be planted this spring."

Subsequently, NRCS notified the Farm Service Agency (FSA) that the 2.24-acre parcel on Smith's property constituted a converted wetland. The purpose of doing so was to allow FSA to determine Smith's eligibility for USDA program benefits.

On August 4, 2009, the Hillsdale County FSA executive director informed Smith that his wetland conversion rendered him indefinitely ineligible for $42,528 in annual USDA benefits.

3. Smith's Administrative Appeals

a. Initial Steps

From 2009 to 2011, Smith pursued two different appeals with USDA's National Appeals Division (NAD): NRCS's wetland determination and ...


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