Opinion
A3-01-85
August 22, 2001
MEMORANDUM AND ORDER
I. Introduction
Before the Court are plaintiffs' motion for a preliminary injunction and to waive security under Rule 65 (doc.'s # 3, 5). Defendant resists the motion (doc. # 27). The matter came on for hearing at 1:30 p.m. on Friday, August 17, 2001, in Fargo, North Dakota. Based on the written submissions and oral arguments of the parties, and for the reasons set forth below, plaintiffs' motion for a preliminary injunction is DENIED. Plaintiffs' motion to waive security is therefore also DENIED as moot.
The Court also GRANTS plaintiffs' motion to exceed page limitations (doc. # 40).
II. Background
Plaintiffs are 108 farmers and ranchers who had loans written down pursuant to the 1987 Agricultural Credit Act (ACA), Pub.L. No. 100-233, 101 Stat. 1679 (1988). Defendant is the United States Department of Agriculture (USDA), sued through its secretary, Ann Veneman. The ACA allowed farmers delinquent in payments to USDA for various agricultural loans to have their debts and debt financing restructured, including having their secured debt written down to reflect the actual market value of the farm land security. Those who participated in this program were required to sign Shared Appreciation Agreements (SAA's).In general, the SAA's provide that USDA, along with the farmer, will receive some percentage of the appreciated value of the land used as collateral to secure the underlying loans. The exact amounts USDA receives, and the conditions under which it receives them, are the primary issues in the case. In short, plaintiffs claim defendant USDA has misinterpreted the SAA's to require payment of up to the amount of the loan written down, due upon the expiration date of the agreement, generally ten years, unless one of several triggers occurs sooner. Plaintiffs urge that repayment is only due if one of the triggers occur; if they do not, the SAA simply disappears. They also claim the amount of repayment is limited to a lower figure than USDA claims.
III. Analysis
Plaintiffs seek a preliminary injunction to stop the USDA from enforcing the SAA's. The four-part standard for preliminary injunctions is drawn from the Dataphase case:
[W]hether a preliminary injunction should issue involves consideration of (1) the threat of irreparable harm to the movant; (2) the state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that movant will succeed on the merits; and (4) the public interest.
Dataphase Systems, Inc. v. C.L. Systems, Inc., 640 F.2d 109, 114 (8th Cir. 1981). No factor is dispositive; rather, "the question is whether the balance of equities so favors the movant that justice requires the court to intervene to preserve the status quo until the merits are determined." Id. at 113. Plaintiffs bear the burden on each factor. See Gelco Corp. v. Coniston Partners, 811 F.2d 414, 418 (8th Cir. 1987). The Court concludes that, on balance, plaintiffs have not met their burden under Dataphase.
1. Likelihood of success on the merits
The Court begins with the premise that the meaning of the SAA's depends on the statutes authorizing them, making this a case of statutory construction. See Maricopa-Stanfield Irrigation and Drainage Dist. v. United States, 158 F.3d 428, 435 (9th Cir. 1998) (holding that government contracts should be interpreted "against the backdrop of the legislative scheme that authorized them"). More specifically, however, the question is whether USDA's interpretation of the statute is correct. In such situations, a court follows a two-step process:
First, a reviewing court must determine whether congressional intent is clear from the plain language of the statute. In ascertaining the plain meaning of the statute, the court must look to the particular statutory language at issue, as well as the language and design of the statute as a whole. When an analysis of the statute reveals a clear congressional intent, an agency interpretation of the statute contrary to that intent is not entitled to deference. A court must not defer when it appears from the statute or legislative history that the accommodation is not one that Congress would have sanctioned. If, however, the language of the statute is ambiguous, and the legislative history reveals no clear congressional intent, a reviewing court must defer to a reasonable agency interpretation of the statutory provision.
Ragsdale v. Wolverine Worldwide, Inc., 218 F.3d 933, 937 (8th Cir. 2000) (internal citations omitted). This Chevron standard guides the Court's inquiry here. Of course, for a preliminary injunction the Court need not reach final resolution of these questions; it must only decide if plaintiffs have shown a sufficient likelihood of success to justify an injunction.
The first question is thus whether congressional intent is plain from the statute. Id. The provision establishing SAA's is codified at 7 U.S.C. § 2001(e). The first subsection provides that "As a condition of restructuring a loan . . ., the borrower of the loan may be required to enter into a shared appreciation arrangement that requires the repayment of amounts written off or set aside." 7 U.S.C. § 2001(e)(1). This general description of SAA's speaks in terms of "required" payments, not possible or contingent payments. The next section states that SAA's `shall have a term not to exceed 10 years' and provides that the amount repaid shall be based on the "difference between the appraised values of the real security property at the time of restructuring and at the time of recapture." § 2001(e)(2). The third subsection provides that the amount recaptured shall be 75% within the first four years of the agreement and 50% thereafter. § 2001(e)(3).
In the Court's view, however, the next section is the most important for this issue before it. It provides:
Recapture shall take place at the end of the term of the agreement, or sooner —
(A) on the conveyance of the real security property;
(B) on the repayment of the loans; or
©if the borrower ceases farming operations.
§ 2001(e)(4). Thus, the language of the statute directs that a recapture will take place, assuming appreciation in land value; the question is whether it will be "at the end of the term of the agreement, or sooner," if one of the three listed events occurs.
This is the interpretation of the statute urged by the USDA, and the Court is at this point in general agreement. At the hearing, plaintiffs seemed to argue that this section meant that USDA could not collect beyond a ten year period, even if the triggering events happened sooner. The Court remains open to this argument, and any others plaintiffs may have, construing this provision, but for now it is inclined to accord greater weight to USDA's construction. Thus, the Court is compelled to grant USDA's interpretation deference under Chevron, weighing heavily against a preliminary injunction.
The Court also notes that three different courts have interpreted these statutes as USDA urges. See Israel v. U.S. Dept. of Agr., 135 F. Supp.2d 945 (W.D.Wis. 2001); In re Moncur, 1999 WL 33287727 (Bankr.D.Id. 1999); In re Tunnisen, 216 B.R. 834 (Bankr.D.S.D. 1996). Further, four other cases, including one from another Eighth Circuit district court, resolve issues of valuations connected with enforcing SAA's on their expiration, lending further support to USDA's position. See Viers v. Glickman, 2000 WL 33363197 (S.D.Iowa 2000); Curtis v. USDA, 2001 WL 822413 (W.D. Mi. 2001); Wright v. USDA, 2001 WL 822417 (W.D. Mi. 2001); Pandora Farms v. USDA, Civil No. 00-1753-A (E.D.Va. July 5, 2001). Plaintiffs attack the precedential force of these cases, and the Court recognizes that they are neither binding nor dispositive. Nevertheless, at this initial stage, the Court concludes that the weight of authority favors defendant.
Plaintiffs rely on a 1994 Tax Court opinion which mentions, while listing the debts and assets of a taxpayer, that an SAA will leave the taxpayer with no obligations independent of the note if none of the triggers occur within ten years. Lawinger v. Commissioner of Internal Revenue, 103 T.C. 428, 431 (1994). At this early stage, the Court does not accord this case much precedential force in light of the more recent cases more directly on point.
The Court also recognizes plaintiffs' argument based on the language of SAA itself. Plaintiffs emphasize especially the use of the word "expire," a word which does create some confusion. The contracts are not a model of clarity; indeed, the Court finds them generally confusing. However, the Court is obliged to consider the clear command of the statute that "recapture shall take place at the end of the term of the agreement, or sooner[,]" 7 U.S.C. § 2001(e)(4), and the arguably confusing words of a contract enacted pursuant to a clear statute must be construed in light of that statute. See Maricopa,158 F.3d at 435. Therefore, any ambiguity in the contract does not support an injunction.
Both sides have also argued that the instructions sent to farmers in connection with the SAA's support their conclusions. Plaintiffs argue the instructions were confusing, and the Court recognizes they are long and technical. Nevertheless, the instructions clearly state as follows:
During this 10 years, FmHa will ask you to repay part of the debt it wrote down if you do one of the following things:
a. Sell or convey the real estate
b. Stop farming
c. Pay off the entire debt
If you do not do one of these things during the 10 years, FmHa will ask you to repay part of the debt written down at the end of the 10 years.
This paragraph seriously undercuts the likelihood that plaintiffs can win on the merits, adding weight to the Court's conclusions. In conclusion, the Court concludes that plaintiffs have not shown a likelihood of success on the merits of their claim regarding whether amounts will be due when the SAA's expire. This weighs heavily against granting an injunction in plaintiffs' favor.
The Court recognizes the contract was contained in a detailed set of regulations implementing the SAA's. Plaintiffs make much of these regulations and how they have changed over time. The Court agrees that there seem to be some confusing aspects to these regulations, and it looks forward to the parties' briefing of the issue in the context of the motion to dismiss.
The Court reaches a similar conclusion with regard to plaintiffs' argument that USDA is calculating the amounts due incorrectly. The regulations implementing the SSA provisions required establishment of an "Equity Recapture Account Amount" for each farmer who signed an SAA. This figure was derived by taking the lesser of (1) loan balance less net recovery value or (2) market value of land less net recovery value. This figure was then entered on the worksheet filled out by each farmer.
Plaintiffs urge this figure represents the maximum amount collectible under the SAA. USDA contrarily argues that the maximum amount collectible is in fact the amount written down, pointing to a line in the instructions which indicates that USDA can never collect more than it has written down. The Court is admittedly somewhat confused by this point, and it looks forward to plaintiffs' response to USDA's pending motion to dismiss on this count. As events stand, however, the Court cannot say that plaintiffs have shown a likelihood of succeeding on this claim, weighing heavily against an injunction.
2. Threat of irreparable harm to the movant
The Eighth Circuit has made clear that, because the basis of injunctive relief has always been irreparable harm, the movant must show a "sufficient threat" that the harm it will suffer is irreparable. Bandag, Inc. v. Jack's Tire Oil, Inc., 190 F.3d 924, 926 (8th Cir. 1999). Plaintiffs argue they face irreparable harm because the ultimate result of USDA's interpretation of the SAA is that most of them will be unable to pay, will have the loan accelerated, and will therefore be subject to foreclosure. They further assert that "foreclosure and threatened foreclosure of a farm and farm home are per se irreparable harm," pointing out that several courts have so found. (Pl.'s Reply Br. at 4-5, citing Coleman v. Block, 562 F. Supp. 1353 (D.N.D. 1983); Branstad v. Glickman, 118 F. Supp.2d 925 (D. Iowa 2000)).
In response, USDA first points out that those who have paid their SAA accounts face no injury. Further, those plaintiffs whose SAA's have not yet expired owe no money and thus face no injury. It also points out that 18 of the 60 claims have entered into suspension agreements, forestalling foreclosure; interest accruing on the amounts while in suspension can, it argues, be compensated with money damages. Additionally, Congress recently modified the statute to allow for reamortization over a term of up to twenty five years, allowing farmers to reduce actual payments to levels which may allow them to remain in business. See 7 U.S.C. § 2001(e)(7) (enacted October 28, 2000).
Finally, as to those plaintiffs USDA believes currently owe on their SAA's but who have not executed suspension agreements, USDA points out that it has not actually foreclosed on any of them. Moreover, it has accelerated only two accounts, one of which it has referred to the Department of Justice. It thus suggests that plaintiffs do not currently face irreparable harm.
The Court is highly sympathetic with plaintiffs' position. It has no doubt that the loss of a farm and farm home through acceleration and foreclosure constitute irreparable harm. See generally Coleman, 562 F. Supp. 1353; Branstad, 118 F. Supp.2d 925. The question, however, is whether this is a threat sufficiently posed by the current state of affairs so as to justify a preliminary injunction, especially in light of the Court's finding on the likelihood of success on the merits. See Bandag, 190 F.3d at 926 (requiring a "sufficient threat" of harm). The Court concludes that under the current facts, it is not.
Initially, the Court notes USDA offers a suspension plan by which plaintiffs can defer payments for up to three years. Thus, plaintiffs can forestall foreclosure at least during the course of litigation, and if this Court holds, as plaintiffs urge, that the SAA's do not require repayment, the loss would have been fully averted. Plaintiffs view suspension as insufficient, but it does reduce their immediate exposure. Further, USDA has not instituted any foreclosure proceedings. Similarly, USDA may have the power to accelerate loans and seize government payments from plaintiffs, but it has done so on only two accounts. This undercuts the harm to plaintiffs overall; there is a possibility of irreparable harm, but the fact such proceedings are not in process undercuts the showing of the sufficiency of that harm.
The Court notes that while it is sympathetic to many of plaintiffs' arguments about the harshness of repaying SAA's in light of the appreciation of land prices, which have led to SAA amounts being larger than anticipated, and the generally poor state of the farm economy, these are not issues this Court is empowered to address. These structural problems may require legislative solution, and the Court urges plaintiffs to seek such remedies. In short, in light of the Court's resolution of the merits issues, the existence of suspension agreements, and the fact that foreclosure and acceleration are not generally occurring, the Court finds plaintiffs have not made a sufficient showing of a threat of irreparable harm to justify an injunction.
3. Balance of harms
Plaintiffs argue that the balance of harms favors them, since they face loss of their farms while USDA faces merely slightly later collection of SAA amounts. The Court tends to agree, and concludes that this factor favors plaintiffs. However, this is but one among four, and the finding is undercut by the fact that the first two factors do not clearly favor plaintiffs.
4. The public interest
Plaintiffs argue that the public interest favors preventing USDA from collecting and thus removing farmers from the land. They argue that public policy of ensuring repayment of loans is not harmed by an injunction, because USDA is free to collect its debts later, if the Court rules it may do so. USDA argues that the public interest favors allowing it to collect the amounts due it under the SAA's, and an injunction would impair its ability to protect public funds. The Court finds these are both strong arguments, and thus cannot say that plaintiffs have borne their burden of showing this factor favors them.
In summary, the Court finds that plaintiffs have not demonstrated a likelihood of success on the merits or shown a sufficient threat of irreparable harm. While the balance of harms does favor the plaintiffs, the Court finds that the public interest does not clearly favor either party. Therefore, on balance, the Court concludes that plaintiffs have not met their burden under Dataphase. The motions for a preliminary injunction and to waive security are therefore DENIED.
IT IS SO ORDERED.