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Ackerman v. United States Department of Agriculture

United States District Court, E.D. Michigan, Northern Division

December 16, 2019



          Thomas L. Ludington, United States District Judge.

         On June 5, 2017, a group of sixty-five farmers and incorporated farms filed suit against eighteen insurance companies and three federal governmental entities: the United States Department of Agriculture, the Risk Management Agency, and the Federal Crop Insurance Corporation. ECF No. 1.

         The Plaintiffs were dry bean farmers in Michigan, Minnesota, and North Dakota who purchased crop insurance under the Dry Bean Revenue Endorsement. Plaintiffs contend that the federal Defendants incorrectly calculated the “harvest price” of dry beans in 2015. Consequently, Plaintiffs did not receive indemnity for crop insurance to which they believed they were entitled to under the Dry Bean Revenue Endorsement.

         Defendant United States Department of Agriculture (“USDA”) “is a department of the United States Government and is the parent agency of Defendant [Risk Management Agency (“RMA”)], which in turn administers Defendant [Federal Crop Insurance Corporation (“FCIC”)], a wholly government-owned corporation created under the Federal Crop Insurance Act, 7 U.S.C. §1501, et seq.” Id. at 14. The eighteen Insurance Defendants sold insurance coverage to Plaintiffs during 2015.

         On November 22, 2017, the Federal Defendants and Insurance Defendants both filed motions to dismiss. ECF Nos. 51, 52. On March 8, 2018, Plaintiffs filed a motion for leave to file a second amended complaint correcting the names of certain Plaintiffs. ECF No. 64. On April 18, 2018, the Court issued an order granting the motions to dismiss and also granting the motion for leave to file an amended complaint. ECF No. 70. The Court concluded that Plaintiffs had not complied with the insurance policies' arbitration requirements. Accordingly, all Insurance Defendants were dismissed. The Court also dismissed without prejudice all Plaintiffs who did not farm or reside in the Eastern District of Michigan, concluding that they were bringing suit in the improper venue. On April 30, 2018, Plaintiffs filed a second amended complaint. ECF No. 72.

         On May 2, 2018, Plaintiffs filed a motion for reconsideration of the Court's order to dismiss. ECF No. 74. In the motion, Plaintiffs argued that the plaintiffs from outside the Eastern District of Michigan should have been transferred to the proper venue instead of dismissed. The motion was granted in part and the Minnesota Plaintiffs were transferred to the District of Minnesota. ECF No. 80.

         On October 31, 2018, Plaintiffs filed a motion for supplementation of the administrative record. ECF Nos. 86, 87. Plaintiffs contended that information was excluded from the Administrative Record that was necessary for the Court to determine whether Defendants acted arbitrarily and capriciously. Id. The Court determined that the Administrative Record adequately addressed the matters in question and the motion was denied. ECF No. 91.

         On April 1, 2019, both Plaintiffs and the federal Defendants filed cross-motions for summary judgment. ECF Nos. 96, 97. The Court determined that the federal Defendants acted consistent with federal law and regulations. ECF No. 109. It denied Plaintiffs' motion, granted Defendants' motion, and dismissed Plaintiffs' amended complaint.

         Plaintiffs filed a motion for reconsideration of the Court's previous order. ECF No. 111. For the following reasons, the motion will be denied.


         Plaintiffs are bringing this putative class action “on behalf of all dry bean farmers in the Eastern District of Michigan (navy [pea] beans or small red beans).” Second Am. Compl. at 2, ECF No. 72. Each Plaintiff purchased Dry Bean Revenue Endorsement (“DRBE”) crop insurance for their dry bean crops in 2015. Id. “The purpose of this insurance was to protect dry bean farmers against a market price decline.” Id. However, Plaintiffs allege that though “dry bean market prices declined greatly in 2015, no indemnity was paid to Plaintiffs.” Id. In the present suit, Plaintiffs seek a declaratory judgment invalidating certain administrative determinations related to the Dry Bean Revenue Endorsement (“DBRE”) and ordering Defendants to ensure that Plaintiffs' losses are indemnified or their premiums reimbursed. Id. at 2-3.


         Congress passed the Federal Crop Insurance Act in 1938 in order to “promote the national welfare by improving the economic stability of agriculture through a sound system of crop insurance and providing the means for the research and experience helpful in devising and establishing such insurance.” 7 U.S.C. §1502(a). The act includes a provision permitting the Federal Crop Insurance Corporation to conduct pilot programs for proposed crop insurance. 7 U.S.C. §1523(a)(1). Those proposed programs must be submitted to the FCIC Board. The Board then evaluates “whether a proposal or new risk management tool tested by the pilot program is suitable for the marketplace and addresses the needs of producers of agricultural commodities.” 7 U.S.C. §1523(a)(1).

         The current dispute arises out of a pilot program developed by Watts and Associates (“Watts”), a “privately owned economic consulting firm located in Billings, Montana.” Second Am. Compl. at 15. The FCIC Board approved the program, titled Dry Bean Revenue Endorsement, in 2012 for dry bean crops in Minnesota and North Dakota. Id. The pilot program became effective in 2013. Id. FCIC approved an expansion of the pilot program to include farmers in Michigan, effective in 2014. Id. Pursuant to that expansion, Michigan dry bean farmers “purchased 1, 286 DBRE policies, covering 151, 464 acres” in 2015. Id.

         The DBRE provides that farmers may elect its coverage only if they already have the “Common Crop Insurance Policy” and the “Dry Bean Crop Provisions” in force. DBRE at 1(b), ECF No. 50, Ex. A. The Common Crop Insurance Policy permits farmers to elect either revenue protection or yield protection for certain crops, not including dry beans. CCIP 2010 Amendments at 1, ECF No. 50, Ex. B. “Revenue protection provides protection against loss of revenue caused by price changes or low yields or a combination of both.” Id. “Yield protection provides protection for production losses only.” Id. “For crops for which revenue protection is available, a projected price and a harvest price will be determined in accordance with the Commodity Exchange Price Provisions.” Id. Yield protection guarantees are “determined by multiplying the production guarantee by the projected price.” Id. Thus, for yield protection, the “harvest price is not used.” Id. Revenue protection guarantees are “determined by multiplying the production guarantee by the greater of the guaranteed price or the harvest price.” Id. “The projected price is used to determine the premium, and any replant payment or prevented planting payment. The harvest price is used to value the production to count.” Id.

         Under the Common Crop Insurance Policy and the Dry Bean Crop Provisions addendum, dry bean farmers do not have the option of obtaining revenue protection. Rather, they are limited to yield protection guarantees. DBRE, however, provides dry bean farmers access to revenue protection guarantees.


         DBRE offers two kinds of revenue protection: revenue protection without harvest price exclusion and revenue protection with harvest price exclusion. The coverage for both kinds of protection is calculated similarly. The first step is determining the projected price for dry beans. On or before February 15 of the crop year, the RMA must collect the “offer price and expected contract volume” from dry bean buyers for the various types of dry beans covered by the DBRE. DBRE §7(e)(1)(A). After reviewing that information, the RMA will announce projected prices for bean types “no later than the third business day of March.” Id. at §(e)(1)(D). The projected price provides the baseline guarantee for purposes of revenue protection.

         Not later than December 15 of the harvest year, the RMA must announce the “harvest price” for each type of bean. Id. at §(e)(2)(E). The harvest price is determined pursuant to the following procedure: “The market price of each type for each day of publication during the period beginning on the first business day in September and ending on the last business day of November will be collected.” Id. at §(e)(2)(A). The “publication” mentioned in §(e)(2)(A) refers to the “Bean Market News, a publication of the Agricultural Marketing service, USDA, ” which publishes weekly market prices for specific types of dry beans in specific regions. §2. Typically, the market price will be “the sum of the market prices for that type divided by the number of prices included in that sum.” Id. at §(e)(2)(D). If the reported market price for a certain date is qualified by “terms that indicate a small volume of sales or no sales” occurred on that date, that market activity will be disregarded for purposes of calculating the market price. Id. at §(e)(2)(B). And, “if there is a market price for fewer than 50 percent of the dates of publication, ” no harvest price will be established. Id. at §(e)(2)(C).

         The DBRE also provides contingencies for the event that either the projected price or harvest price cannot be calculated pursuant to the procedure provided above. Section 7(e)(3) indicates that, “[i]f a projected price for any of these types cannot be determined as described herein; . . . [t]he projected price will be determined by RMA and announced not later than the third business day of March; and . . . [t]he harvest price will equal the projected price.” Section 3(c)(1) explains that if a projected price cannot be calculated for a type of dry bean, coverage for that type of bean will be subject to the terms of §7(e)(3). Section 3(c)(2) provides that “[i]f the harvest price cannot be calculated for the crop year for a type for which a projected price was determined in accordance with section 7 of this endorsement, the harvest price will be equal to the projected price.”


         The DBRE provides three examples which demonstrate how indemnity is calculated. First, if a farmer chooses yield protection but not revenue protection, the DRBE protections will not apply. In that scenario, the farmer obtains yield protection for a specific number of acres and a specific production guarantee per acre. See §5 Example 1. In the example provided, the farmer insured 50 acres with a 1, 600 lbs. per acre production guarantee, which totaled an 80, 000 lbs. production guarantee. Id. That guarantee is multiplied by the projected price for the type of bean, and the resulting sum is the value of the guarantee (in the example, $22, 400). If the farmer's actual yield is 25, 000 lbs., that amount is multiplied by the projected price and then ...

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