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No. 04-1361

In the Supreme Court of the United States

MICHAEL FULLENKAMP, ET AL.,
PETITIONERS

v.

MIKE JOHANNS, SECRETARY OF AGRICULTURE

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

PAUL D. CLEMENT
Solicitor General
Counsel of Record

PETER D. KEISLER
Assistant Attorney General

BARBARA C. BIDDLE
JEFFREY CLAIR
Attorneys
Department of Justice
Washington, D.C. 20530-0001
(202) 514-2217

QUESTION PRESENTED

Whether the court of appeals correctly upheld the Secretary of Agriculture's construction of a statutory cap on the amount of milk production that may qualify for federal assistance under the Milk Income Loss Contract Program, 7 U.S.C. 7982 (Supp. II 2002).

In the Supreme Court of the United States

No. 04-1361

MICHAEL FULLENKAMP, ET AL.,
PETITIONERS

v.

MIKE JOHANNS, SECRETARY OF AGRICULTURE

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT

BRIEF FOR THE RESPONDENT IN OPPOSITION

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-14a) is reported at 383 F.3d 478. The memorandum and or der of the district court (Pet. App. 15a-39a) are unreported.

JURISDICTION

The judgment of the court of appeals was entered on September 2, 2004. A petition for rehearing was denied on January 6, 2005 (Pet. App. 40a). The petition for a writ of certiorari was filed on April 6, 2005. The juris diction of this Court is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. The Milk Income Loss Contract Program, 7 U.S.C. 7982,1 establishes an income support program authorizing monthly federal payments to dairy farmers. In order to be eligible for payments under the program, a dairy farm producer must enter into a contract with the Secretary of Agriculture. 7 U.S.C. 7982(b). Once the contract is in place, a farmer is eligible for prospec tive monthly payments on qualifying production mar keted during the period running from the first day of the month in which the contract is signed to September 30, 2005. 7 U.S.C. 7982(g)(1). Contracting farmers are also eligible for a single, retrospective, "transition" payment for qualifying production marketed during the period from December 1, 2001, to the last day of the month pre ceding the month in which the contract is signed. 7 U.S.C. 7982(h).

The criteria by which the amount of assistance pay ments is determined are set forth in three provisions of the statute: (1) 7 U.S.C. 7982(c), which sets out the gen eral formula by which the Secretary determines the amount of assistance payments to be dispensed under the program; (2) 7 U.S.C. 7982(d), which, in defining the "payment quantity" used in Section 7982(c)'s statutory formula, specifies the amount of production that quali fies for federal assistance; and (3) 7 U.S.C. 7982(h), which provides that the formula used to determine the amount of a transition payment is the formula contained in Section 7982(c).

These provisions state as follows:

(c) Amount

Payments to a producer under this section shall be calculated by multiplying (as determined by the Secretary)-

(1) the payment quantity for the producer during the applicable month established under subsection (d) of this section;

(2) the amount equal to-

(A) $16.94 per hundredweight; less

(B) the Class I milk price per hundredweight in Boston under the applicable Federal
milk marketing order; by

(3) 45 percent.

(d) Payment quantity

(1) In general

Subject to paragraph (2), the payment quan tity for a producer during the applicable month under this section shall be equal to the quantity of eligible production marketed by the producer during the month.

(2) Limitation

The payment quantity for all producers on a single dairy operation during the months of the applicable fiscal year for which the producers receive payments under subsection (b) of this sec tion shall not exceed 2,400,000 pounds. For pur poses of determining whether producers are pro ducers on separate dairy operations or a single dairy operation, the Secretary shall apply the same standards as were applied in implementing the dairy program under section 805 of the Agri culture, Rural Development, Food and Drug Ad ministration, and Related Agencies Appropria tions Act, 2001 (as enacted into law by Public Law 106-387; 114 Stat. 1549A-50).

* * * * *

(h) Transition rule

In addition to any payment that is otherwise available under this section, if the producers on a dairy farm enter into a contract under this section, the Secretary shall make a payment in accordance with the formula specified in subsection (c) of this section on the quantity of eligible production of the producer marketed during the period beginning on December 1, 2001, and ending on the last day of the month preceding the month the producers on the dairy farm entered into the contract.

* * * * *

7 U.S.C. 7982.

2. The Secretary promulgated regulations imple menting these provisions on October 18, 2002. See 67 Fed. Reg. 64,454. The regulations provide, inter alia, that a transition payment is subject to the same 2.4 million-pound annual statutory cap on eligible produc tion that applies to monthly payments. See 7 C.F.R. 1430.206(b)(1), 1430.207(b); see also 7 C.F.R. 1430.208(d) ("Payments under this subpart may be made to a dairy operation only up to the first 2.4 million pounds of eligi ble milk production per applicable fiscal year, including any year in the transition period."). The Secretary ad vanced several reasons for adopting this construction of the statute. First, the conference committee report ac companying the legislation expressly referred to the production cap without any distinction between monthly and transition payments. 67 Fed. Reg. at 64,456. Sec ond, previous similar dairy price support legislation in corporated production caps limiting all production with out distinction. Ibid. Third, and most important, a con trary interpretation would vitiate the statutory cap by permitting producers to delay entering into a contract until immediately before the end of the program, at which point they could seek an uncapped transition pay ment for all production that would have otherwise been subject to limitation under the monthly payment pro gram. Ibid. The Secretary accordingly concluded that "the cap covers all fiscal years, including the fiscal year in which the transition period falls." Ibid.

3. Petitioners filed this action in the United States District Court for the Northern District of Ohio, seek ing, inter alia, a declaratory judgment that dairy pro ducers who are entitled to payments during the transi tion period are entitled to a lump-sum payment for all the milk produced and marketed during the transition period, without a cap. Petitioners also requested an in junction compelling the Secretary to modify the regula tions to allow uncapped transition payments.

The district court rejected petitioners' challenge (Pet. App. 15a-39a) and upheld the regulations, applying the two-step analysis set forth in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), and Barnhart v. Walton, 535 U.S. 212 (2002). The court first reasoned that Section 7982 does not un ambiguously forbid the Secretary's interpretation, be cause Section 7982(d)(2) can be construed to cap all pay ments to producers, and because Section 7982(h), which authorizes the transition payments, subjects those pay ments to the formula set forth in Section 7982(c), which in turn incorporates the Section 7982(d) cap. Pet. App. 29a-31a. Having concluded that the statute is ambigu ous, the court proceeded to step two of the Chevron analysis, pursuant to which a reviewing court must defer to an agency's interpretation of a statute it is charged with administering if the interpretation is reasonable. Chevron, 467 U.S. at 843. The court concluded that the Secretary's interpretation of the statute here is reason able and therefore upheld the regulations. Pet. App. 31a-34a.

4. The court of appeals affirmed. Pet. App. 1a-14a. Likewise engaging in the two-step Chevron analysis, the court first considered the text of Section 7982 and con cluded that it did not clearly indicate whether the phrase "payments under subsection (b)," which are sub ject to the production cap, see 7 U.S.C. 7982(d)(2), in cludes transition payments as well as prospective pay ments. Pet. App. 9a. The court further determined that "[n]either the legislative history of the statute nor the parties' explanations of how their interpretations fur ther the purpose of the statute sufficiently clarify the ambiguity in the statutory language." Id. at 10a.

The court then proceeded to step two of Chevron, under which it must uphold the Secretary's interpreta tion so long as it is reasonable. Pet. App. 13a. On that point, the court held that the Secretary's interpretation is "eminently reasonable" because the statutory cap on qualifying production could easily be construed to apply to any payment authorized by the dairy farmer's con tract, including a transition payment, and because ap plying the cap to transition payments "ensures that the cap has a meaningful role in the statute." Id. at 13a-14a.

ARGUMENT

The court of appeals' decision is correct and does not conflict with the decision of any other court of appeals. Indeed, no other court of appeals has had an occasion to construe the particular statutory provision at issue here, which concerns one-time retrospective payments under a program in which even ongoing monthly payments are now scheduled to terminate on September 30, 2005. In addition, the Secretary's interpretation of the statute is not only reasonable, but is the interpretation required by its text and structure and is, in any event, the most natural reading of the statute. Further review by this Court is therefore not warranted.

1. As the Secretary argued in the court of appeals (Pet. App. 8a-9a), the conclusion that transition pay ments are subject to the statutory cap is not only a per missible interpretation of the statute, but also the one required by its plain text.

Subsection (b), entitled "Payments," directs the Sec retary to offer to enter into contracts with dairy farm ers, under which those farmers "receive payments on eligible production." See 7 U.S.C. 7982(b). Ensuing subsections provide for two types of such payments: pe riodic, monthly payments commencing with the month in which the contract was entered into through Septem ber 30, 2005, see 7 U.S.C. 7982(e) and (g)(1), and a lump- sum retroactive ("transition") payment for the period from December 1, 2001, through the month proceeding the month in which the contract was entered into, see 7 U.S.C. 7982(h). Subsection (c), entitled "Amount," es tablishes a single formula for calculating the payments "under this section," which includes subsection (h) and its provision for transition payments. 7 U.S.C. 7982(c). Indeed, subsection (h) itself provides that transition payments are to be made "in accordance with the for mula specified in subsection (c)." 7 U.S.C. 7982(h). Sub section (c), in turn, provides that the "payment quantity" to be used in calculating the amount of payments is the quantity "established under subsection (d)." 7 U.S.C. 7982(c)(1). Paragraph (2) of subsection (d) con tains the cap on the payment quantity. It provides that the "payment quantity" for all producers on a single dairy farm "during the months of the applicable fiscal year for which the producers receive payments under subsection (b) of this section shall not exceed 2,400,000 pounds." 7 U.S.C. 7982(d)(2). Because this cap is ex pressly incorporated by reference in subsection (c), and because subsection (h) expressly provides that transition payments are to be made in accordance with the formula in subsection (c), the cap is applicable to transition pay ment by the plain language of the statute.

Petitioners contend (Pet. 5) that the reference in 7 U.S.C. 7982(d)(2) to "payments under subsection (b)" limits the cap to periodic monthly payments made after the contract is entered into, and excludes the lump-sum retroactive payment for the transition period. But peti tioners point to nothing in the Act to support that con tention. They assert only that the reference to pay ments under subsection (b) "implies" that there are pay ments that are not under that subsection. That is not so. As explained above, subsection (b) provides for the Sec retary to offer contracts to dairy farmers under which those farmers will receive payments on eligible produc tion, and it does not draw any distinction between peri odic monthly payments and retroactive lump-sum pay ments. Moreover, subsection (h) in fact confirms that the contract is the basis for making the lump-sum tran sition payment, because it applies only to farmers who "enter into a contract under this section." 7 U.S.C. 7982(h). Thus, the negative implication petitioners seek to draw from the reference to "subsection (b)" in 7 U.S.C. 7982(d)(2) is without merit and cannot in any event overcome the express terms of the statute.

If there were any lingering doubt, subsection (g) fur ther supports the Secretary's interpretation. Subsection (g), which is entitled "Duration of contract," provides that "[e]xcept as provided in * * * subsection (h)," any contract entered into "under this section" shall cover eligible production from the first month of the contract through September 30, 2005. The quoted introductory phrase makes clear that, for purposes of making the lump-sum transition payment, the period prior to the contract month is covered by the contract. That provi sion clearly rests on the proposition that payments un der subsection (h) are payments under the contract, and thus covered by subsection (b) as well. See 7 U.S.C. 7982(g). If Congress had instead intended to limit appli cability of the cap to periodic monthly payments, it would have applied the cap to "payments under subsec tion (e)," which pertains specifically to monthly pay ments, rather than to "payments under subsection (b)," which refers to payments under the contracts generally.2 For the foregoing reasons, the plain text of Section 7982 subjects transition payments to the statutory cap. At the very least, that is the most natural reading of the statute.

2. Even if it is assumed, arguendo, that the statutory text does not compel the Secretary's conclusion, the court of appeals correctly sustained the Secretary's reg ulations as a reasonable interpretation of the statute. As the court explained (Pet. App. 13a), the statutory language is at least amenable to the Secretary's con struction: because transition payments under subsec tion 7982(h) result only upon entering into a contract under subsection 7982(b), they reasonably can be consid ered "payments under subsection (b)" subject to the production cap in subsection 7982(d)(2). In addition, as the court of appeals also found, the Secretary's con struction ensures that the statutory cap on production will have meaningful effect. Under petitioners' pre ferred construction, any dairy farmer could evade the cap by delaying entering into a contract until immedi ately prior to the program's expiration, at which point it could then seek a retroactive transition payment without regard to the statutory cap. The result would be a dis bursement equivalent to the sum of the prospective monthly payments if there were no statutory cap at all. The Secretary's construction forecloses circumvention of the program in this manner and ensures that the cap, which Congress expressly wrote into the statute, serves a meaningful purpose. It is thus a reasonable interpre tation of the statute requiring judicial deference.

3. Petitioners do not challenge the court of appeals' conclusion that the Secretary's interpretation of the statute is a reasonable one. Rather, they contend that the court of appeals misapplied Chevron in even reach ing that point of the analysis. Petitioners' contentions are without merit and provide no basis for further review.

In Chevron, this Court established a two-step frame work through which a court should review an agency's construction of a statute it administers. The first step requires the reviewing court to determine whether Con gress has directly spoken to the question at issue. If the legislative intent is clear, that is the end of the matter, "for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress." Chevron, 467 U.S. at 842-843. If, however, "the statute is silent or ambiguous with respect to the specific issue," the court must uphold the agency's action as long as it is based on a permissible construction of the statute. Id. at 843.

In this case, the court of appeals first found that nei ther the text of the statute nor its history, structure, or purpose evinced a clear congressional intent as to the precise question presented: whether transition pay ments are subject to the production cap. See Pet. App. 9a, 10a. The court then considered whether the Secre tary's interpretation was reasonable, and deemed it "eminently" so. Id. at 13a.

a. Petitioners contend that the court of appeals de parted from step one of Chevron by rejecting an inter pretation required by the unambiguous text of the stat ute. See Pet. 12-13. This argument mischaracterizes the decision below. Contrary to petitioners' assertion, the court of appeals found textual infirmities in both par ties' proposed interpretations of the statute. The court noted that although in its view the Secretary's interpre tation rendered one phrase superfluous,3 petitioners' proposed interpretation is not compelled by the text of the statute, because it is irreconcilable with statutory text stating that all contract payments are subject to the statutory cap and that transition payments are available only to farmers with whom the Secretary contracts. Pet. App. 9a-10a.

The court thus did not, as petitioners argue, reject the plain language of the statute. Instead, having identi fied problems with each party's reading of the statutory text, it found that the statute is ambiguous. The court of appeals' searching and thorough inquiry into the plain language of the statute is entirely consistent with step one of Chevron and other decisions of this Court. In deed, the court of appeals complied fully with the direc tives of the only case petitioners cite in support of their contention that the court erred in its textual analysis. As petitioners note, Barnhart v. Sigmon Coal Co., 534 U.S. 438 (2002), instructs a reviewing court to "begin with the language of the statute," ceasing its inquiry if "the statutory language is unambiguous." Pet. 12 (quot ing Sigmon Coal Co., 534 U.S. at 450). The court of ap peals first turned to the language of the statute, found ambiguity in the text, and accordingly continued, rather than ceased, its analysis, thus properly conforming to the very precedent to which petitioners appeal.

b. Petitioners also contend that the court of appeals erred under Chevron in its consideration of the legisla tive history, structure, and purpose of the statute. Pet. 13. This Court has stressed that when the words of a statute are unambiguous, judicial inquiry is complete. Connecticut Nat'l Bank v. Germain ex rel. O'Sullivan's Fuel Oil Co., 503 U.S. 249, 253-254 (1992). The Court, however, has not foreclosed resort under Chevron to other traditional tools of statutory construction when the text of the statute does not, on its face, conclusively yield a clear meaning. Indeed, the Court considered legislative history in Chevron itself. See 467 U.S. at 851- 853, 862. Furthermore, the Court has in subsequent invocations of Chevron consulted legislative history and other traditional tools of statutory construction in in stances where the statutory text was not dispositive. See, e.g., General Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 600 (2004); FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133, 142-143 (2000); Babbitt v. Sweet Home Chapter of Communities, 515 U.S. 687, 704-708 (1995); Pauley v. BethEnergy Mines, Inc., 501 U.S. 680, 697-698 (1991); Pension Benefit Guar. Corp. v. LTV Corp., 496 U.S. 633, 648-650 (1990); Japan Whaling Ass'n v. American Cetacean Soc'y, 478 U.S. 221, 233-240 (1986).

Here, the court of appeals first determined that the text of the statute is unclear and only then considered legislative history and other tools of statutory construc tion. Its approach was thus fully consistent with the decisions of this Court.

c. Contrary to petitioners' contention (Pet. 9), there is no significant disagreement among the courts of ap peals concerning the role legislative history may play in Chevron analysis. The courts of appeals generally rec ognize that courts cannot ordinarily employ legislative history under Chevron to support a departure from an interpretation that the plain language of the statute would otherwise compel. See, e.g., Succar v. Ashcroft, 394 F.3d 8, 31 (1st Cir. 2005) ("[W]here the plain text of the statute is unmistakably clear on its face, there is no need to discuss legislative history."); United Transp. Union v. Surface Transp. Bd., 183 F.3d 606, 613 (7th Cir. 1999) (unambiguous statutory text is controlling at step one of Chevron, without regard to legislative his tory); Legal Envtl. Assistance Found., Inc. v. EPA, 118 F.3d 1467, 1475 (11th Cir. 1997) (same).

In addition, the courts of appeals generally agree that consideration of legislative history may be appro priate at step one of Chevron when a statute's text does not conclusively yield a clear meaning. Indeed, many of the opinions petitioners cite support that very principle. See, e.g., Succar, 394 F.3d at 31 (permitting legislative history to be considered at step one of Chevron "where appropriate to discern and/or confirm legislative in tent"); Coke v. Long Island Care at Home, Ltd., 376 F.3d 118, 127 (2d Cir. 2004) (reviewing legislative his tory at step one of Chevron where the statutory issue concerned the meaning of "a vague term with no obvious plain meaning"); Director, OWCP Programs v. Sun Ship, Inc., 150 F.3d 288, 291 (3d Cir. 1998) (authorizing legislative history review in Chevron inquiry if statutory text is ambiguous); Dominion Res., Inc. v. United States, 219 F.3d 359, 365 (4th Cir. 2000) (in Chevron in quiry, legislative history is "the first tool of statutory construction a court utilizes to determine congressional intent when statutory language is unclear"); Bolen v. Dengel, 340 F.3d 300, 308 (5th Cir. 2003) (legislative history employed when construing legislative intent in first step), cert. denied, 541 U.S. 959 (2004); Ragsdale v. Wolverine Worldwide, Inc., 218 F.3d 933, 936 (8th Cir. 2000) (Chevron step one permits examination of legisla tive history when statutory language is ambiguous), aff'd, 535 U.S. 81 (2002); American Rivers v. FERC, 187 F.3d 1007, 1016 (9th Cir. 1999) (legislative history con sidered at step one of Chevron where "statutory lan guage evinces no specific congressional directive"), opin ion amended in part, 201 F.3d 1186 (9th Cir. 2000); Seneca-Cayuga Tribe v. National Indian Gaming Comm'n, 327 F.3d 1019, 1042 (10th Cir. 2003) (applying legislative history at step one where text did not indicate clear meaning), cert. denied, Ashcroft v. Seneca-Cayuga Tribe, 540 U.S. 1218 (2004); Davis v. Southern Energy Homes, Inc., 305 F.3d 1268, 1278 (11th Cir. 2002) (look ing to both text and legislative history to determine in tent at step one), cert. denied, 538 U.S. 945 (2003); American Bankers Ass'n v. National Credit Union Admin., 271 F.3d 262, 271 (D.C. Cir. 2001) (legislative history examined at step one of Chevron where court was "[f]aced with two plausible interpretations" of the statutory text).4

The decision below is consistent with those decisions of other courts of appeals. The court of appeals, after "[f]ocusing on the statutory language," determined that Congress's intent "is not stated clearly in the language of the statute." Pet. App. 10a. Only then did the court consider whether it could resolve this textual ambiguity by examining the legislative history, structure, and pur pose of the statute. Id. at 10a-13a. Moreover, because the court below found that none of those other tools of statutory construction established a clear congressional intent on the statutory question at issue, the question whether a reviewing court may resort to legislative his tory at step one of the Chevron analysis had no bearing on the outcome of this case. The court of appeals pro ceeded to the second step of Chevron, just as it would have if it had not first considered the statute's legisla tive history, structure, and purpose and found them unilluminating. And at step two, the court found the Sec retary's interpretation to be "eminently reasonable," a determination petitioners do not dispute. Thus, not only do petitioners fail to present any circuit conflict or sig nificant legal issue concerning the particular statute at issue here. They also fail to raise any concrete issue under Chevron that is of significance to this case or that would warrant this Court's review in any event.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted.

PAUL D. CLEMENT
Solicitor General
Counsel of Record

PETER D. KEISLER
Assistant Attorney General

BARBARA C. BIDDLE
JEFFREY CLAIR
Attorneys

JULY 2005

1 All references to 7 U.S.C. 7982 are to the Supplement II (2002) to Title 7 of the United States Code.

2 Contrary to the petitioners' assertion and the suggestion of the court of appeals, the Secretary's interpretation does not render the reference to "subsection (b)" in subsection (d)(2) superfluous. See Pet. 6-7; Pet. App. 10a. Rather, the reference to the operative portion of Section 7982 provides without qualification for "payments" (not merely monthly payments) to a person who enters into a contract with the Secretary. The fact that Congress referred to that particular subsec tion, rather than to Section 7982 as a whole, renders the reference more precise, not superfluous.

3 As explained above, the court of appeals was wrong in believing that the reference to "subsection (b)" is superfluous under the Sec retary's interpretation. See p. 9 n.2, supra.

4 The Seventh Circuit has stated in dictum in a footnote that "[t]he first step of Chevron focuses on the text of the statute, leaving legis lative history for the second step." United States v. Dierckman, 201 F.3d 915, 923 n.12 (2000). In support of that aside, the Dierckman court quoted Bankers Life & Casualty Co. v. United States, 142 F.3d 973 (7th Cir.), cert. denied, 525 U.S. 961 (1998), in which the court remarked that although the Seventh Circuit "has examined legislative history during the first step of Chevron, we now seem to lean toward reserving consideration of legislative history * * * until the second Chevron step." Id. at 983 (emphasis added and citation omitted).

Petitioners also assert (Pet. 11) that the decision below is inconsistent with the Eight Circuit's decision in United States v. Sabri, 326 F.3d 937 (2003), aff'd, 541 U.S. 600 (2004). Sabri is completely inapposite. The Eighth Circuit there cautioned against using legislative history to justify a departure from unambiguous statutory text. Id. at 943. The instant case, however, concerns the use of legislative history where the court has determined that the statutory text, standing alone, is unclear. Moreover, Sabri concerned judicial interpretation of a criminal statute, not judicial review of an agency's decision under Chevron. In the context of a Chevron inquiry, the Eighth Circuit has sanctioned the use of legislative history at step one to discern congressional intent. See Ragsdale, supra.