Filed: Feb. 19, 2015
Latest Update: Mar. 02, 2020
Summary: Case: 13-11052 Document: 00512940123 Page: 1 Date Filed: 02/19/2015 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED No. 13-11052 February 19, 2015 Lyle W. Cayce CONTENDER FARMS, L.L.P.; MIKE MCGARTLAND, Clerk Plaintiffs - Appellants v. UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant - Appellee Appeal from the United States District Court for the Northern District of Texas Before JOLLY and JONES, Circuit Judges, and GODBEY*, Distri
Summary: Case: 13-11052 Document: 00512940123 Page: 1 Date Filed: 02/19/2015 IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT United States Court of Appeals Fifth Circuit FILED No. 13-11052 February 19, 2015 Lyle W. Cayce CONTENDER FARMS, L.L.P.; MIKE MCGARTLAND, Clerk Plaintiffs - Appellants v. UNITED STATES DEPARTMENT OF AGRICULTURE, Defendant - Appellee Appeal from the United States District Court for the Northern District of Texas Before JOLLY and JONES, Circuit Judges, and GODBEY*, Distric..
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Case: 13-11052 Document: 00512940123 Page: 1 Date Filed: 02/19/2015
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
No. 13-11052 February 19, 2015
Lyle W. Cayce
CONTENDER FARMS, L.L.P.; MIKE MCGARTLAND, Clerk
Plaintiffs - Appellants
v.
UNITED STATES DEPARTMENT OF AGRICULTURE,
Defendant - Appellee
Appeal from the United States District Court
for the Northern District of Texas
Before JOLLY and JONES, Circuit Judges, and GODBEY*, District Judge.
E. GRADY JOLLY, Circuit Judge:
Contender Farms, L.L.P. and Mike McGartland appeal the district
court’s order granting summary judgment in favor of the United States
Department of Agriculture (“USDA”). McGartland owns Contender Farms,
and each actively participates in the Tennessee walking horse industry by
buying, selling, and exhibiting horses. They challenge a USDA regulation (the
“Regulation”) promulgated under the Horse Protection Act (“HPA”), 15 U.S.C.
§§ 1821–31, requiring that private entities, known as Horse Industry
Organizations (“HIOs”), impose mandatory suspensions on those participants
* District Judge of the Northern District of Texas, sitting by designation.
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found to engage in a practice known as “soring.” 1 Soring is prohibited by the
HPA, and the USDA, through various contractual arrangements, has long
relied on HIOs to provide inspectors at Tennessee walking horse events.
According to Contender Farms and McGartland, this new Regulation
exceeds the USDA’s rulemaking authority under Chevron, U.S.A., Inc. v.
Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), violates the
Administrative Procedure Act, 5 U.S.C. §§ 701–06, and fails to account for its
impact on small businesses under the Regulatory Flexibility Act, 5 U.S.C. §§
601–12. They also argue that the Regulation deprives them of due process and
violates the separation of powers. The USDA disputes each contention, and it
further argues that Contender Farms and McGartland fail to present a
justiciable controversy on grounds of standing and ripeness.
At summary judgment, the district court held that Contender Farms and
McGartland presented a justiciable controversy, but it entered a final
judgment in favor of the USDA on the merits of the challenge, concluding that
the Regulation is valid. The parties renew these arguments on appeal. For
the reasons that follow, we AFFIRM the district court’s holding as to
justiciability, REVERSE and VACATE its ruling on the merits, and REMAND
the case for entry of judgment in favor of Contender Farms and McGartland.
I.
To resolve this appeal, we must interpret both the HPA and the USDA
regulations promulgated under the HPA. Ultimately, we must decide whether
1 “Soring” is a process through which trainers may artificially achieve the distinctive
gait prized in Tennessee walking horses. A trainer can teach a horse to attain this gait
through legitimate means, but some trainers may produce a similar gait in a horse by
applying chemical agents to the skin or utilizing other methods to induce pain in a horse’s
legs. These latter practices are known as soring.
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the Regulation falls within the scope of the USDA’s authority under the HPA.
We begin with a summary of the statutory and regulatory framework.
The HPA requires the USDA to “prescribe by regulation requirements
for the appointment by the management of any horse show, horse exhibition,
or horse sale or auction of persons qualified to detect and diagnose a horse
which is sore or to otherwise inspect horses for the purposes of enforcing this
chapter.” 15 U.S.C. § 1823(c). Under the HPA, the management of each horse
show serves as primary enforcer of the HPA. The HPA provides to the
respective managements a choice: (1) decline to hire USDA-approved
inspectors and accept liability for failing to disqualify a sored horse,
irrespective of whether such management knows that the horse is a sore; or (2)
hire USDA-approved inspectors and face liability only if management allows
the horse to compete after being told that it is a sore. Id. at §§ 1824(3) & (5).
Most of the major Tennessee walking horse events have chosen to avoid “strict
liability” and followed the second option.
Pursuant to the provisions of § 1823(c), the USDA does not employ its
own inspectors. Instead, the USDA created, by regulation, what the parties
call the “DQP program.” The USDA authorizes designated qualified persons
(“DQPs”), private individuals holding a valid DQP license, to inspect horses at
events. 9 C.F.R. § 11.7(a). In turn, the USDA requires that “[l]icensing of
DQP’s will be accomplished only through DQP programs certified by the
Department and initiated and maintained by horse industry organizations or
associations [i.e., HIOs].” Id. at § 11.7(b). The USDA established various
requirements for HIO-administered training programs, including required
hours of classroom instruction in particular topics, production of a sample
examination, criteria for maintaining qualifications and performance abilities,
methods for insuring uniform interpretation and enforcement of the HPA, and
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standards of conduct for inspectors. Id. HIOs must also submit their rulebooks
to the USDA.
Id. at § 11.41.
Under this program, an event’s management that wishes to have DQPs
perform inspections contracts with an HIO, which then provides the DQPs who
perform the inspections. To participate in the event, a competitor must agree
to be bound by that HIO’s procedures. Traditionally, HIOs imposed penalties
for soring violations and provided procedures for appealing those penalties.
HIOs were free, however, to vary their penalties and appeals procedures, and
competitors had a choice to select events, which could be based in part on a
particular HIO’s penalties and procedures. Both parties admit that HIO
penalties varied, with some imposing mandatory suspensions for certain soring
violations and others declining to impose the more stringent penalties.
For years the USDA has sought to reduce such disparities among HIOs.
Initially, the USDA entered into voluntary “Operating Plans” with HIOs
whereby cooperating HIOs agreed to impose certain penalties for particular
violations and honor suspension lists from other HIOs. In 2010, the HIOs could
not agree with the USDA on an operating plan. That same year the USDA
Office of Inspector General released a report (the “OIG Report”), which
concluded that the private system of HPA enforcement through HIOs yielded
inconsistent enforcement of the HPA and failed to address adequately the
problem of soring.
As a result of the OIG Report, the USDA proposed the Regulation. It
solicited public comments on the Regulation and adopted it as a Final Rule in
June 2012. The Regulation requires that HIOs adopt mandatory minimum
penalties for a number of soring violations as a condition of certification for
participation in the DQP program. 9 C.F.R. § 11.25(c). Additionally, the
Regulation requires HIOs to adopt an appeals process that “must be approved
by the [USDA],” and “the appeal must be granted and the case heard and
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decided by the HIO or the violator must begin serving the penalty within 60
days of the date of the violation.” Id. at § 11.25(e). The Regulation also
reiterates that the USDA may institute its own enforcement proceedings
pursuant to its authority under the HPA “with respect to any violation of the
[HPA], including violations for which penalties are assessed in accordance with
this section.”
Id. at § 11.25(f).
II.
We first consider whether Contender Farms and McGartland present a
justiciable controversy. The USDA has raised an issue of standing and an issue
of ripeness. We review both issues de novo, and we examine each in turn.
Roark & Hardee LP v. City of Austin, 522 F.3d 533, 542 (5th Cir. 2008).
A.
We begin with the basic proposition that the Constitution limits our
jurisdiction to “Cases” and “Controversies.” U.S. Const. Art. III, § 2. The
doctrine of standing flows from this constitutional limitation and is an
essential aspect of it. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992);
Simon v. E. Ky. Welfare Rights Org.,
426 U.S. 26, 37 (1976). “At bottom, ‘the
gist of the question of standing’ is whether [the parties invoking standing] have
‘such a personal stake in the outcome of the controversy as to assure that
concrete adverseness which sharpens the presentation of issues upon which
the court so largely depends for illumination.’” Massachusetts v. Envtl. Prot.
Agency,
549 U.S. 497, 517 (2007) (quoting Baker v. Carr,
369 U.S. 186, 204
(1962)).
Contender Farms and McGartland can satisfy the constitutional
elements of standing by “present[ing] (1) an actual or imminent injury that is
concrete and particularized, (2) fairly traceable to the defendant’s conduct, and
(3) redressable by a judgment in [their] favor.” Duarte ex rel. Duarte v. City of
Lewisville, Tex., 759 F.3d 514, 517 (5th Cir. 2014). They must also support
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each standing element “in the same way as any other matter on which the
plaintiff bears the burden of proof, i.e., with the manner and degree of evidence
required at the successive stages of the litigation.” Lujan, 504 U.S. at 561. 2
We conclude that Contender Farms and McGartland satisfy each of the three
elements.
1.
We initiate our discussion by addressing a basic question that underlies
all three elements of standing—“whether the plaintiff is himself an object” of
the challenged regulation. Id. at 561. If a plaintiff is an object of a regulation
“there is ordinarily little question that the action or inaction has caused him
injury, and that a judgment preventing or requiring the action will redress it.”
Id. at 561–62. By contrast, “when the plaintiff is not himself the object of the
government action or inaction he challenges, standing is not precluded, but it
is ordinarily substantially more difficult to establish.”
Id. at 562 (internal
quotation marks omitted). As this distinction is often a helpful guidepost in
the standing inquiry, we examine this matter first and conclude that
Contender Farms and McGartland are objects of the Regulation. See
Duarte,
759 F.3d at 518.
Whether someone is in fact an object of a regulation is a flexible inquiry
rooted in common sense. For example, in Duarte, we addressed a city
ordinance prohibiting registered sex offenders from establishing residence
near areas where children gather. Id. at 515. A registered sex offender, along
2 As this case is before us on a motion for summary judgment, Contender Farms and
McGartland must set forth sufficient facts that comply with Rule 56 of the Federal Rules of
Civil Procedure. Lujan, 504 U.S. at 561. We note, however, that the district court considered
this case through a unique procedure that was, in its terms, “in effect, a bench trial on the
written briefs.” Neither party indicates that this procedure alters our standard of review on
the standing issue. The district court concluded that Contender Farms and McGartland
clearly presented a justiciable controversy, and as we explain infra, we agree.
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with his wife and daughters, challenged the ordinance. We concluded that the
registered sex offender was a target of the ordinance, and we “reach[ed] the
same conclusion with respect to [his] wife and daughters.” Id. at 518. The city
made the argument that the USDA makes today: that the ordinance applies
by its terms only to the individual regulated and not to aggrieved, yet
unnamed, parties. We rejected this argument, noting that it “overlooks the
practical impact of the Lewisville ordinance on the family [of the sex offender].”
Id. Thus, we concluded that the family members demonstrated a level of
interference as to their lives that was sufficient to establish standing to
challenge the regulation.
The Third Circuit applied a similar analysis when a number of sports
leagues challenged a New Jersey statute permitting betting on many types of
sporting events. Nat’l Collegiate Athletic Ass’n v. Governor of New Jersey, 730
F.3d 208 (3d Cir. 2013) (“NCAA”). In NCAA, the court noted that New Jersey’s
law “does not directly regulate the Leagues, but instead regulates the activities
that may occur at the State’s casinos and racetracks.”
Id. at 219. Although
the court expressed reluctance in concluding that the sports leagues could
satisfy the standing requirements merely by pointing to the statute, it noted
that the law is “in a sense, as much directed at the Leagues’ events as it is
aimed at the casinos.”
Id. Thus, “[t]his is not a generalized grievance like
those asserted by environmental groups over regulation of wildlife in cases
where the Supreme Court has found no standing.”
Id.
Applying this commonsense approach to the facts in this case, it is clear
that Contender Farms and McGartland are objects of the Regulation. By its
terms, the Regulation requires an HIO to enforce USDA-approved minimum
suspension penalties for many types of soring violations. 9 C.F.R. § 11.25(a).
This requirement targets participants in Tennessee walking horse events like
Contender Farms and McGartland. The Regulation states that in the event a
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DQP discovers a violation, “any individuals who are responsible for showing
the horse, exhibiting the horse, entering or allowing the entry of the horse in a
show or exhibition, selling the horse, auctioning the horse, or offering the horse
for sale or auction must be suspended.” Id. at § 11.25(b)(1). Thus, the
suspensions target participants in Tennessee walking horse events like
Contender Farms and McGartland, and they are as much objects of the
Regulation as the HIOs themselves.
The Regulation requires that an HIO “provide a process in its rulebook
for alleged violators to appeal penalties.” Id. at § 11.25(e). Contender Farms
and McGartland must accept an HIO’s rulebook as a condition of entry. In the
event of any soring violation, they would be subject to the USDA-approved
appeal procedures. To compete in an event, Contender Farms and McGartland
must agree to be bound by the appeal process found in the HIO’s rulebook.
Although the HIOs must maintain the appeal procedures, event participants
are actually subject to them. Contender Farms and McGartland indicate that
they will continue to participate in these events, and they will be bound by
these procedures.
We find unpersuasive the USDA’s argument that the Regulation targets
only those horse owners who sore horses, not owners like Contender Farms
and McGartland who purportedly do not. All participants in a competition that
uses HIOs agree at the outset to be bound by the terms of the HIO’s rulebook,
which includes the now-mandatory suspension and appeal procedures. The
participants also agree to be bound by the inspection procedures. As the record
indicates, inspections are far more art than science. In many cases, inspectors,
veterinarians, and other professionals will disagree as to whether a horse is
actually a sore. The record also suggests that those who actually sore their
horses will go to great lengths to hide the results in order to avoid detection,
which further muddies the waters with regard to inspections.
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Finally, we also reject the USDA’s argument that Contender Farms and
McGartland lack standing because they are not “forced” to use HIO-affiliated
shows. The record establishes that the preeminent events in the Tennessee
walking horse industry affiliate with HIOs; Contender Farms and McGartland
suggest that they could neither earn a living nor compete recreationally
without participating in these events. Contender Farms and McGartland are
objects of the Regulation because they participate in the type of events that the
Regulation seeks to regulate, i.e., the major Tennessee walking horse events.
To be clear, this Regulation actually depends on the participation of parties
like Contender Farms and McGartland. Thus, we conclude that they are
objects of the Regulation.
2.
Next, we find no reason to depart from the ordinary rule that Contender
Farms and McGartland, as objects of the Regulation, may challenge it.
Contender Farms and McGartland demonstrate a concrete injury resulting
from the Regulation that would be redressable by a favorable decision of this
Court.
An increased regulatory burden typically satisfies the injury in fact
requirement. See Ass’n of Am. R.R.s v. Dep’t of Transp., 38 F.3d 582 (D.C. Cir.
1994) (“American Railroads”). In American Railroads, challengers to a
regulation argued that a new rule required them to comply with two sets of
regulations enforced by two agencies instead of one.
Id. at 585. The court
concluded that the assertion that railroads “are materially harmed by the
additional regulatory burden imposed upon them as the result of a federal
agency’s unlawful adoption of a rule” established standing.
Id. at 586.
The Regulation amounts to an increased regulatory burden. Under the
Regulation, competitors like Contender Farms and McGartland now face
harsher, mandatory penalties from HIOs. Additionally, they may also face
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prosecution from the USDA pursuant to its own enforcement authority.
Naturally, Contender Farms and McGartland, along with any other
competitors, must take additional measures to avoid even the appearance of
soring. Contender Farms and McGartland must also agree to the new
procedures when they enter a competition, and they forfeit their rights under
the previous regulatory framework to “shop around” among competitions
employing different HIOs.
Causation and redressability then flow naturally from the injury. The
record indicates that HIOs offered a range of penalties and appeals procedures
before the USDA adopted the Regulation. Although the USDA correctly notes
that HIOs could impose penalties before the promulgation of the Regulation,
the record indicates that a number of the HIOs previously opposed mandatory
minimum suspensions. 3 If we find that the Regulation is invalid, Contender
Farms and McGartland can again participate in competitions with a range of
available sanctions and appellate processes.
In sum, Contender Farms and McGartland have standing to challenge
the Regulation because they are objects of the Regulation, and they have
independently satisfied the three prongs of constitutional standing.
B.
Alternatively, the USDA contends that Contender Farms and
McGartland have not presented a ripe controversy even if they can meet the
elements of standing. According to the USDA, the dispute is unripe because
there is only a remote possibility that Contender Farms and McGartland will
actually be subject to the mandatory minimum suspensions under the
3 SHOW, Inc., which was a party before the district court, resisted the Regulation.
SHOW had not imposed mandatory suspensions prior to the Regulation, and it opposed such
penalties after the USDA promulgated the Regulation. Although it was once the largest HIO,
it is apparently now inactive.
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Regulation because they do not purport to sore horses. We conclude, however,
that the dispute is ripe for review.
The ripeness and standing analyses are closely related, as ripeness
inquires as to “‘whether the harm asserted has matured sufficiently to warrant
judicial intervention.’” Miss. State Democratic Party v. Barbour, 529 F.3d 538,
544–45 (5th Cir. 2008) (quoting Warth v. Seldin,
422 U.S. 490, 499 n.10 (1975)).
The USDA argues that this is a pre-enforcement challenge to the Regulation,
and in such cases “[a]n allegation of future injury may suffice if the threatened
injury is certainly impending, or there is a substantial risk that the harm will
occur.” Susan B. Anthony List v. Driehaus,
134 S. Ct. 2334, 2341 (2014)
(internal quotation marks omitted). When the parties challenge a regulation,
the ripeness inquiry seeks
to prevent the courts, through avoidance of premature
adjudication, from entangling themselves in abstract
disagreements over administrative policies, and also to protect the
agencies from judicial interference until an administrative
decision has been formalized and its effects felt in a concrete way
by the challenging parties.
Abbott Laboratories v. Gardner, 387 U.S. 136, 148–49 (1967) (abrogated on
other grounds by Califano v. Sanders,
430 U.S. 99, 105 (1977)).
First, we observe that Contender Farms and McGartland raise a purely
legal challenge to the Regulation. If we adopt their view, the Regulation
exceeds the USDA’s authority as granted by Congress and violates various
constitutional principles. Thus, “[i]t is unnecessary to wait for the [Regulation]
to be applied in order to determine its legality.” Nat’l Envtl. Dev. Ass’n’s Clean
Air Project v. Envtl. Prot. Agency, 752 F.3d 999, 1008 (D.C. Cir. 2014).
Moreover, the USDA has promulgated a final rule, and it appears from this
litigation that it has every intention of requiring HIOs to adopt these
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requirements or face decertification from the DQP program. As we explained
above, this will affect Contender Farms and McGartland.
As the Supreme Court noted in Driehaus, “[n]othing in this Court’s
decisions requires a plaintiff who wishes to challenge the constitutionality of a
law to confess that he will in fact violate that law.” 134 S. Ct. at 2345. The
challenge here is similar to that in Driehaus, where a public interest group
challenged an Ohio law prohibiting false advertising about a political
candidate. The group had accused a congressional candidate of supporting a
measure that included “taxpayer-funded abortion,” and the candidate filed a
challenge based on the false advertising law.
Id. at 2339. A panel found
probable cause that the group violated the law, but the candidate lost and
dropped his challenge before it could be finally resolved.
Id. at 2339–40. To
support justiciability, the group claimed that it intended to engage in similar
future activity, and it sought to proceed with its challenge to the law.
Id. at
2343. The Supreme Court concluded that the alleged future conduct was
“arguably” proscribed by the law, particularly given its broad reach.
Id. at
2344. This Regulation targets soring, which is a practice that yields a large
number of “false positives.” Inspectors face significant difficulties
distinguishing violators from non-violators. As in Driehaus, Contender Farms
and McGartland will encounter these risks because they intend to participate
in these events in the future.
Accordingly, we hold that the dispute is ripe for review. We therefore
AFFIRM the district court’s ruling as to justiciability, and we proceed to
analyze the merits of the challenge to the Regulation.
III.
Because the USDA is statutorily authorized to administer the HPA, we
review the merits of the regulation under the well-established principles of
Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
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(1984). Dhuka v. Holder, 716 F.3d 149, 154 (5th Cir. 2013). Under Chevron,
we must first decide whether “Congress has directly spoken to the precise
question at issue,” and if it has, we apply Congress’s answer to the
question.
467 U.S. at 842–43. Alternatively, “if the statute is silent or ambiguous with
respect to the specific issue, the question for the court is whether the agency’s
answer is based on a permissible construction of the statute.”
Id. at 843. Our
goal at all times is to effectuate congressional intent, as we presume “that
Congress, when it left ambiguity in a statute administered by an agency,
understood that the ambiguity would be resolved, first and foremost, by the
agency, and desired the agency (rather than the courts) to possess whatever
degree of discretion the ambiguity allows.” City of Arlington, Tex. v. Fed.
Commc’ns Comm’n,
133 S. Ct. 1863, 1868 (2013) (internal quotation marks
omitted).
The district court concluded that the HPA did not address the precise
question at issue and, proceeding to the second prong of Chevron, it found that
the USDA’s construction of the statute was reasonable. On appeal, the USDA
and its amici urge us to adopt the district court’s interpretation of the HPA.
Contender Farms and McGartland argue that the HPA addresses this issue
and the statute clearly prohibits the Regulation. For the reasons that follow,
we agree with Contender Farms and McGartland, and thus we REVERSE and
VACATE the district court’s ruling on this ground without reaching either the
second prong of Chevron or the various other issues that Contender Farms and
McGartland raise. See Texas v. United States, 497 F.3d 491, 499 (5th Cir. 2007)
(avoiding various constitutional issues by finding that the regulation at issue
failed under Chevron). We outline the relevant law, parse the Regulation, and
then apply the law to the HPA to decide this case.
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A.
To determine whether a statute is ambiguous, we evaluate it using the
“traditional tools of statutory construction.” Chevron, 467 U.S. at 843 n.9.
Unlike the deference given to agency interpretations of ambiguous statutes,
“[t]he judiciary is the final authority on issues of statutory construction and
must reject administrative constructions which are contrary to clear
congressional intent.”
Id. Indeed, “[w]here Congress has established a clear
line, the agency cannot go beyond it.” City of
Arlington, 133 S. Ct. at 1874.
We determine whether a statute is ambiguous based in part on “the text
itself, its history, and its purpose.” Bellum v. PCE Constructors, Inc., 407 F.3d
734, 739 (5th Cir. 2005). Canons of statutory interpretation further assist us
in assessing the meaning of a statute. See Miss. Poultry Ass’n, Inc. v. Madigan,
31 F.3d 293, 307 (5th Cir. 1994). Several basic considerations guide our inquiry
under these canons: (1) we begin with the statute’s language; (2) we give
undefined words “their ordinary, contemporary, common meaning;” (3) we read
the statute’s words in proper context and consider them based on the statute
as a whole; and (4) we consider a statute’s terms in the light of the statute’s
purposes. Wilderness Soc’y v. U.S. Fish & Wildlife Serv.,
353 F.3d 1051, 1060
(9th Cir. 2003) (internal quotation marks omitted); see also Bell Atl. Tel. Cos.
v. Fed. Commc’ns Comm’n,
131 F.3d 1044, 1047 (D.C. Cir. 1997) (explaining
that “text, legislative history, and structure” are traditional tools of statutory
interpretation).
Our review is ultimately “‘bound, not only by the ultimate purposes
Congress has selected but by the means it has deemed appropriate, and
prescribed, for the pursuit of those purposes.’” Texas, 497 F.3d at 502 (quoting
MCI Telecomm. Corp. v. AT&T Co.,
512 U.S. 218, 231 n.4 (1994)) (emphasis
removed). We do not merely presume that a power is delegated if Congress
does not expressly withhold it, as then “‘agencies would enjoy virtually
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limitless hegemony, a result plainly out of keeping with Chevron and quite
likely with the Constitution as well.’” Id. at 503 (quoting Ethyl Corp. v. EPA,
51 F.3d 1053, 1060 (D.C. Cir. 1995)). Thus, an administrative agency does not
receive deference under Chevron merely by demonstrating that “a statute does
not expressly negate the existence of a claimed administrative power (i.e., when
the statute is not written in “thou shalt not” terms).” Ry. Labor Execs.’ Ass’n
v. Nat’l Mediation Bd.,
29 F.3d 655, 671 (D.C. Cir. 1994) (emphasis in the
original).
With these principles in mind, we turn first to the challenged Regulation
and then to the USDA’s regulatory authority under the HPA.
B.
Speaking somewhat broadly, we can say that the Regulation alters but
does not eliminate the longstanding practices surrounding the DQP program:
HIOs train and certify DQPs according to USDA requirements, which persons
then inspect horses at those shows at which the management has contracted
with an HIO to provide DQPs. We will now proceed to the relevant aspects of
the Regulation.
First, the Regulation imposes mandatory minimum penalties that must
be assessed by HIOs for soring violations. Previously, HIOs developed and
enforced their own penalties according to their rulebooks. Although HIOs were
required to provide copies of these rulebooks to the USDA, the USDA was not
formally involved in writing or imposing penalty assessments. See 9 C.F.R. §
11.41 (requiring HIOs to annually furnish the USDA with their rulebooks and
disciplinary procedures). Instead, the USDA attempted to influence HIOs
through voluntary agreements. Under this Regulation, however, “[e]ach HIO
that licenses DQPs . . . must include in its rulebook, and enforce, penalties for
the violations listed in this section that equal or exceed the penalties listed in
paragraph (c) of this section and must also enforce the requirement in
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paragraph (d) of this section.” Id. at § 11.25(a) (emphasis added). Thus, the
Regulation establishes the penalties that HIOs must impose as a condition of
HIO participation in the DQP program. 4
Second, the Regulation requires that HIOs establish particular appeals
procedures to address disagreements over DQP findings of violations.
Specifically, the Regulation provides:
The HIO must provide a process in its rulebook for alleged
violators to appeal penalties. The process must be approved by the
Department. For all appeals, the appeal must be granted and the
case heard and decided by the HIO or the violator must begin
serving the penalty within 60 days of the date of the violation. The
HIO must submit to the Department all decisions on penalty
appeals within 30 days of the completion of the appeal. When a
penalty is overturned on appeal, the HIO must also submit
evidence composing the record of the HIO’s decision on the appeal.
Id. at § 11.25(e). Contender Farms and McGartland primarily argue that the
sixty-day requirement imposed by the USDA makes it nearly impossible for
HIOs adequately to consider the complex issues that often arise with soring
allegations. They also argue that the USDA has not given the HIOs sufficient
time to adopt appropriate appeal procedures. Finally, Contender Farms and
McGartland argue that there is insufficient judicial review of these procedures.
4 These mandatory penalties are significant. Contender Farms and McGartland focus
on suspensions for bilateral soring violations, where a horse is sore in both forelimbs or
hindlimbs, unilateral soring violations, where a horse is sore in one of its forelimbs or
hindlimbs, and violations of the scar rule. Bilateral soring violations require mandatory
suspensions of one year for a first time violation, two years for a second violation, and four
years for any subsequent violations. 9 C.F.R. § 11.25(c)(1). Unilateral soring violations
require mandatory suspensions of sixty days for a first offense, one hundred twenty days for
a second offense, and one year for subsequent offenses. Id. at § 11.25(c)(2). For scar rule
violations, violators receive mandatory suspensions of fourteen days for a first offense, sixty
days for a second offense, and one year for subsequent offenses.
Id. at § 11.25(c)(3).
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Third, the Regulation authorizes the USDA to initiate its own
prosecutions for HPA violations, even if the HIOs penalize a violator in
accordance with § 11.25(c). Indeed, the Regulation provides:
The Department retains the authority to initiate enforcement
proceedings with respect to any violation of the Act, including
violations for which penalties are assessed in accordance with this
section, and to impose the penalties authorized by the Act if the
Department determines that such actions are necessary to fulfill
the purpose of the Act and this part. In addition, the Department
reserves the right to inform the Attorney General of any violation
of the Act or of this part, including violations for which penalties
are assessed in accordance with this section.
Id. at § 11.25(f). As the USDA asserts on appeal, it has not delegated its
enforcement power under the HPA because it expressly reserves its own right
to seek civil or criminal penalties. Similarly, it appears that a violator could
be exonerated by the HIO yet still prosecuted by the USDA on its own authority
under the HPA. Indeed, the appeals procedure requires the HIO to submit its
records to the USDA, and it appears that the Regulation may encourage such
prosecutions. See
id. at §§ 11.25(e)–(f).
In sum, the Regulation is an indisputably significant effort by the USDA
to become involved in HIO enforcement procedures. Although participants in
horse shows have always been subject to regulations from both HIOs and the
USDA, the USDA has now taken intrusive steps into the private scheme to
strengthen the penalties that HIOs must levy against those found to sore
horses. Additionally, the USDA significantly increased its oversight of HIO
review procedures. In the past the HIOs could develop their own appeal
procedures, but these procedures must now be approved by the USDA and
reconfigured in accordance with the USDA’s specific requirements. So, we now
move on to decide whether the HPA contemplates such USDA involvement in
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HIO enforcement mechanisms and, as we explain below, we conclude that it
does not.
C.
The USDA purports to draw its authority to adopt the Regulation from
several provisions of the HPA. Upon examining these provisions, we conclude
that none of these provisions authorizes the Regulation but conversely, that
these provisions plainly prohibit the Regulation.
1.
First, to justify the extension of its authority asserted in the Regulation,
the USDA invokes its statutory duty to regulate horse inspectors under §
1823(c). The HPA provides as follows:
The Secretary shall prescribe by regulation requirements for the
appointment by the management of any horse show, horse
exhibition, or horse sale or auction of persons qualified to detect
and diagnose a horse which is sore or to otherwise inspect horses
for the purposes of enforcing this chapter.
15 U.S.C. § 1823(c) (emphasis added). The USDA invoked this provision when
it issued its notice of a Final Rule, stating that “requiring HIOs to implement
a minimum penalty protocol would strengthen our enforcement of the [HPA]
by ensuring that minimum penalties are assessed and enforced consistently by
all HIOs that are certified under the regulations pursuant to [§ 1823] of the
[HPA].” 77 Fed. Reg. at 33,608. The Regulation plainly imposes conditions of
certification for HIOs that build upon the more general regulations the USDA
already imposes. See 9 C.F.R. § 11.25(a) (referencing the certification
conditions in 9 C.F.R. § 11.7).
As always, we begin our initial inquiry by looking to the plain language
of § 1823(c). Here, when reduced to its essence, the provision permits the
USDA to promulgate “requirements for the appointment by the management .
. . of persons qualified to detect and diagnose a horse . . . or to otherwise inspect
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horses.” 15 U.S.C. § 1823(c). Its meaning hinges on two terms undefined by
the statute—“requirements” and “qualified.” Thus, turning to the common
understanding of these words, a “requirement” is commonly: “1. That which is
required; something needed. 2. Something obligatory: a prerequisite.” The
American Heritage Dictionary of the English Language 1105 (William Morris
ed. 1981). A person is “qualified” if he or she is “[c]ompetent, suited, or having
met the requirements for a specific position or task.” Id. at 1067. 5
The USDA relies heavily on the broad definition of “requirements,”
arguing that the Regulation merely adopts new “requirements for HIOs” that
participate in the DQP program. This may well be true, but the argument is
off target. The statutory authorization to promulgate “requirements” refers,
not to requirements for HIOs, but requirements for “persons” to perform
inspections of horses. Section 1823(c) does not authorize the USDA to adopt,
carte blanche, any condition that it wishes for participation in the DQP
program. Instead, a “requirement” promulgated pursuant to § 1823(c) must
relate to whether “persons” are “qualified” to inspect horses for evidence of
soring. Thus, an event’s management must appoint inspectors deemed
“qualified” by the USDA pursuant to its regulations.
The Regulation here extends the authority of the USDA beyond that
statutorily defined mission. Although federal agencies often possess broad
authorities to regulate behavior, an agency may not “create from whole cloth
new liability provisions.” Nat’l Pork Producers Council v. U.S. Envtl. Prot.
Agency, 635 F.3d 738, 753 (5th Cir. 2011) (“Pork Producers”). For example, in
Pork Producers the EPA attempted to impose liability on certain animal
5 Indeed, other dictionaries define both terms using similar language. See, e.g., The
Random House Dictionary of the English Language, The Unabridged Edition 1174, 1219
(Jess Stein ed. 1981).
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feeding operations under the Clean Water Act if those operations “propose” to
discharge various pollutants into waterways. 635 F.3d at 750–51. We
concluded that the Clean Water Act only regulates those who discharge and
not those who propose to discharge; thus, the regulation violated the Clean
Water Act.
Id. at 751. We concluded that the EPA could not stray beyond the
statute, which evinces the intent of Congress.
Id. at 751–52.
The USDA urges that its new enforcement regime is a proper assertion
of its statutory authority because the HPA anticipates the DQP program, and
consequently, this parallel enforcement scheme is within its statutory
authorization. But nothing in § 1823(c) contemplates USDA involvement in
the enforcement procedures of HIOs. Although nothing in the HPA prohibits
HIOs from voluntarily adopting such procedures, such statutory silence is far
from a grant of authority that permits the USDA to promulgate regulations
imposing uniform penalties. Section 1823(c) plainly allows the USDA only to
impose those requirements that relate to the certification and inspection
process for individual inspectors.
By contrast, and contrary to the statute, the Regulation establishes a
parallel enforcement scheme. 6 It is purportedly a private scheme, but the
USDA interjects itself into each layer of enforcement. At the bottom end, it
imposes mandatory suspensions on competitors, enforced through the HIOs.
Then, the Regulation requires that the HIOs adopt appeal procedures that
6 Indeed, Congress expressly conferred civil and criminal enforcement authority to the
USDA elsewhere in the HPA. Such violators of the HPA could be disqualified from
participating in horse shows “by order of the Secretary, after notice and an opportunity for a
hearing before the Secretary.” 15 U.S.C. § 1825(c). By its plain language, the HPA confers
upon the USDA the ability to disqualify competitors from participating in the Tennessee
walking horse industry following notice and a hearing before the USDA. This provision
addresses the issue of enforcement, and it provides that only the USDA has enforcement
power, not HIOs. In the light of § 1825, the USDA possesses only the authority: (1) to provide
qualifications for inspectors; and (2) to, itself, assess penalties for HPA violations.
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meet the USDA’s approval and comply with its timeline. The plain language
of § 1823(c) simply does not support these measures. 7
2.
Having decided that § 1823(c) does not support the Regulation, we turn
to the rest of the HPA to decide whether any other provision supports the
Regulation. The USDA points us to its general rulemaking authority under
the HPA, which provides that “[t]he Secretary is authorized to issue such rules
and regulations as he deems necessary to carry out the provisions of this
chapter.” 15 U.S.C. § 1828. According to the USDA and its amici, this broad
authority permits this Regulation.
We focus on the terms “provisions of this chapter.” By its terms, § 1828
authorizes the USDA to regulate when necessary to effectuate the other
provisions in the HPA. As counsel for the USDA conceded at oral argument, §
1828 does not purport to allow the USDA to amend the HPA. Thus, this
provision is not a stand-alone source of authority to validate any rule the
USDA wishes; the provision authorizes the USDA only to regulate in order to
carry out the other provisions in the HPA. As we explained above, § 1823(c)
does not extend to enforcement-related regulation, and the enforcement
provisions in § 1825 apply only to the USDA and do not contemplate delegation
to third parties.
7 Both parties direct us to passages from the HPA’s legislative history, which they
submitted as part of the record. These passages suggest that § 1823(c) was passed so that
the USDA could provide minimum qualification and certification requirements for horse
inspectors. Thus, we agree with Contender Farms and McGartland that the legislative
history provides support for our reading of the provision. Congress contemplated that the
USDA would exercise its authority to establish training and education programs for horse
inspectors. Although § 1823(c) permits the USDA to establish duties for inspectors, such
duties must be related to their physical inspections of horses. Nothing in this legislative
history supports the wholesale creation of an enforcement regime carried out by the HIOs.
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We find the District of Columbia Circuit’s decision in American Bar
Association v. Federal Trade Commission, 530 F.3d 457 (D.C. Cir. 2005),
persuasive. In American Bar, the court addressed a challenge to an act
requiring that financial institutions establish certain privacy protections.
Id.
at 459. The law also gave the Federal Trade Commission and other agencies
broad authority to “‘prescribe . . . such regulations as may be necessary to carry
out the purposes of this subchapter with respect to the financial institutions
subject to their jurisdiction.’”
Id. at 459 (quoting 15 U.S.C. § 6804(a)(1)). The
Federal Trade Commission subsequently asserted that it would apply the law
“to regulate attorneys engaged in the practice of their profession,” and various
bar associations brought suit.
Id. at 466. The court concluded that the plain
language of the statute did not apply to attorneys, and it declined to apply
Chevron deference.
Id. at 470–73.
Thus, a broad grant of general rulemaking authority does not allow an
agency to make amendments to statutory provisions. As in American Bar, the
Regulation addresses an area that is plainly outside the USDA’s statutory
authority. The HPA authorizes the USDA to develop a private inspection
system carried out by DQPs who are certified by HIOs, but it does not imply
that the USDA may then establish a mandatory private enforcement system
administered by those HIOs. The USDA’s reading of its rulemaking authority
under § 1828 of the HPA stretches beyond the statute’s plain language. We
also reject the USDA’s argument that it can maintain this scheme merely
because Congress did not expressly disallow such regulation. See
id. at 468.
Thus, we hold that § 1828 does not authorize the Regulation. 8
8The district court also pointed to Congress’s broad factual findings that outlined the
problems associated with soring in § 1822, and the USDA points out that the HPA contains
a broad prohibition on soring in § 1824. Neither provision supports the Regulation, though,
because the USDA is bound by the means that Congress has chosen to prevent soring under
the HPA. See Texas v. United States, 497 F.3d 491, 502 (5th Cir. 2007). It is clear that
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In sum, the plain language of the HPA suggests that Congress intended
a private horse inspection system. This statutory regime does not support the
USDA’s position that Congress authorized it to promulgate the Regulation,
which requires private parties to impose government-mandated suspensions
as an arm of HPA enforcement.
IV.
After review, we AFFIRM the district court’s holding as to justiciability.
Contender Farms and McGartland, regular participants in the Tennessee
walking horse industry, have standing to challenge the Regulation and present
a ripe challenge to it. On the merits, we hold that the district court erred in
concluding that the Regulation is a valid application of USDA regulatory
authority under the HPA, and accordingly, we REVERSE and VACATE its
judgment. Finally, we REMAND the case for entry of judgment in favor of
Contender Farms and McGartland.
AFFIRMED in part; REVERSED and VACATED in part;
and REMANDED for entry of judgment for the Plaintiffs.
Congress did not authorize the USDA to develop a private enforcement scheme administered
by HIOs as a means of policing the HPA.
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