Eighth Circuit Upholds Trump Administration’s Scuttling of Packers and Stockyards Act Rules

By John M. Simpson.

The U.S. Court of Appeals for the Eighth Circuit recently denied a petition for review of the Secretary of Agriculture’s actions to withdraw interim final and proposed regulations under the Packers and Stockyards Act (PSA).  Organization for Competitive Markets, et al., v. Dep’t of Agriculture, et al., No. 17-3723 (8th Cir. Dec. 21, 2018).  The  interim final and proposed rules had been issued by the U.S. Department of Agriculture (USDA) in the Obama Administration in late 2016 but were scuttled by the Trump Administration. 

Sections 202(a)-(b) of the PSA make it unlawful for any packer, swine contractor, or live poultry dealer to “use any unfair, unjustly discriminatory, or deceptive practice” or “give any undue or unreasonable preference or advantage to any particular person or locality in any respect.”  7 U.S.C. §  192(a)-(b).  For about 75 years, USDA had interpreted these provisions as not requiring proof of an anti-competitive effect, but Congress had re-enacted the PSA seven times without endorsing the agency’s view.  Moreover, at least six federal circuits had disagreed with USDA’s position.

In the waning days of the Obama Administration, USDA attempted to enshrine its interpretation in the PSA regulations.  The agency issued an interim final rule on December 20, 2016, entitled the “Farmer Fair Practices Rules” that declared that a finding of an adverse effect on competition is not necessary in all PSA cases.  USDA also issued two proposed amendments to the PSA regulations  that (a) defined when a practice would be violative of the PSA regardless of whether it harms or is likely to harm competition and (b) listed six non-exclusive criteria that the Secretary would consider in determining whether the PSA has been violated.  After the Trump Administration took over, USDA withdrew the interim final rule and issued notice that would take no further action on the proposed rules.  USDA explained that the interim final rule, which conflicted with several circuit court decisions, would engender unproductive litigation and that there was no good cause that warranted the issuance of the interim final rule without additional public comments.  As to cancellation of the proposed rules, USDA explained that the elimination of specific unfair or deceptive practices was better achieved on a case-by-case basis.

On a petition for direct review to the Eighth Circuit, the Court rejected the petitioners’  argument that USDA’s reasoning was “arbitrary and capricious” in violation of the federal Administrative Procedure Act (APA):

An agency’s decision to retain the status quo is more easily defensible than a shift in policy would be.  Here, USDA explained that it was withdrawing the interim final rule and taking no further action on the proposed regulations because the proposed regulatory change of course would generate protracted litigation, adopt vague and ambiguous terms, and might prevent innovation and foster vertical integration that would hinder new market entrants. 82 Fed. Reg. at 48,603-04. These are legitimate regulatory and substantive concerns.  We cannot say that the USDA actions at issue were arbitrary and capricious.  We deny the petition to review under 5 U.S.C. § 706(2)(A).

Slip op. at 8.   The court also rejected the petitioners’ claim that the USDA’s action was agency action “unlawfully withheld or unreasonably delayed” because it was allegedly contrary to a provision of the 2008 Farm Bill setting a two-year deadline for the promulgation of certain PSA regulations:

We are wary of becoming the ultimate monitor of Congressionally set deadlines, as “courts are not charged with general guardianship against all potential mischief in the complicated tasks of government.” …  Congress gave USDA an ambiguous directive in the 2008 Farm Bill.  USDA made extensive efforts to comply, promulgating three final regulations and a proposed regulation on the fourth controversial subject it declined to finalize.  Congress has demonstrated on-going interest in the issue, can determine that its directive has been unreasonably delayed, and take appropriate action.  “[I]t must be remembered that legislatures are ultimate guardians of the liberties and welfare of the people in quite as great a degree as the courts.”

Id. at 13 (citations omitted).   In an interesting footnote, the Court also rejected the notion that, had it agreed with petitioners’ arguments on the merits, the Court could actually have ordered USDA to issue the rules that had been withdrawn:

For relief, petitioners ask us to “order the Department to issue” the rules and regulations it withdrew.  This reflects a distressing disregard of the separation of powers mandated by the Constitution.  Article III grants us the “judicial Power” to decide “Cases” and “Controversies,” not the legislative power to rewrite the PSA or the executive power to promulgate interpretive regulations.

Id. at 5 n.3.