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7th Circuit addresses challenges under the RFA

January 12, 2009

The 7th Circuit Court of Appeals affirmed summary judgment in favor of the United States Department of Agriculture in a suit challenging the agency's rulemaking process and amendment to a milk marketing order. It was the first time the 7th Circuit had addressed who could bring a challenge to a regulatory flexibility analysis or certification under the Regulatory Flexibility Act.

The case, White Eagle Cooperative Association, et al. v. Charles F. Conner, acting secretary, United States Department of Agriculture, et al.,No. 07-3545, was filed by White Eagle Cooperative Association, a cooperative made up of milk producers, after the USDA amended the Mideast Milk Marketing Order. The Agricultural Marketing Agreement Act ensures producers receive a uniform minimum price for their product, regardless of how it is used; however, the AMAA only protects handlers, who prepare milk for resale. The country is divided into regional areas and governed by milk-marketing orders; White Eagle is part of the Mideast order. The orders provide the details for fixing and enforcing minimum prices handlers have to pay for the milk they buy on a monthly basis.

White Eagle challenged the regulation of diversion limits, which are the maximum percentage a handler can divert to plants that don't participate in the standards under the order. Limits prevent the inclusion in the pool of participating plants of excessive quantities of milk diverted to non-pool plants, which affects the prices paid. After hearing public comments on the issue, the USDA reduced diversion limits.

White Eagle filed suit, alleging various violations, including the USDA violated the Regulatory Flexibility Act by failing to undertake an analysis under the RFA and not supporting its RFA certification with any facts.

The 7th Circuit looked to decisions from the Court of Appeals of the District of Columbia on the RFA issue to adopt the rule that small entities directly regulated by the proposed statute may bring a challenge to the RFA analysis or certification of an agency. Because the amendment to the order concerning diversion limits expressly regulates only the handlers' conduct, White Eagle, as a producer, doesn't have standing to challenge the analysis under the RFA, wrote Judge Kenneth Ripple.

The 7th Circuit also affirmed the grant of summary judgment in favor of the USDA on White Eagle's other alleged violations by the USDA of the Agricultural Marketing Agreement Act, the USDA's rules of practice, the Administrative Procedure Act, and the Fifth Amendment's Due Process Clause. The USDA's adoption of the present order wasn't arbitrary or capricious and the agency considered relevant evidence in adopting the current rule, wrote the judge.

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