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Exhaust Administrative Remedies, Reminds 8th Circuit

By Aditi Mukherji, JD on June 06, 2013 | Last updated on March 21, 2019

The Eighth Circuit used a farm case to remind us to exhaust the administrative remedy ladder before suing the government.

Thirty-eight farm producers of corn and soybeans in Iowa filed suit against the USDA and five other government entities, claiming the government improperly calculated revenue assistance payments owed to them under the Supplemental Revenue Assistance Payments Program (“SURE Program”).

The Eighth Circuit affirmed the district court’s finding that the corn and soybean producers failed to exhaust their administrative remedies before filing suit.

Background

The USDA, through its division the Farm Service Agency (FSA), implements the SURE Program on the federal level. It provides disaster assistance payments to eligible producers for losses in crop production or quality resulting from a natural disaster.

The plaintiffs here said the defendants didn't accurately use the statutory formula. When the FSA committee found no data entry errors, the producers filed suit. That, apparently, was jumping the gun. The district court said the producers needed to go through a formal process through the National Appeals Division.

Administrative Remedies

Under 7 U.S.C. § 6912(e), a person has to exhaust all administrative appeal procedures before suing the USDA.

The producers said they did not need to exhaust their administrative appeal procedures because:

  1. Further appeal within the USDA would have been futile,
  2. Their claim raised a purely legal question, and
  3. The Iowa FSA's misconduct equitably estops the government from asserting the failure to exhaust defense.

Futility

An administrative remedy is "futile" if there is doubt about whether the agency could grant effective relief.

But the court ruled the producers' argument runs counter to federal statutes and USDA regulations.

The takeaway point? When suing the government, follow regulations and statutes on appeals carefully because the "futility" exception is a tough sell to the court.

Legal Question

The producers also argued that the legal question exception -- when an administrative resolution is better off being resolved by courts -- excuses their failure to exhaust administrative remedies.

But the court shrugged off the exception, concluding that it's an extremely narrow exception and should only be invoked if the issues involved are ones in which the agency has no expertise.

Since Congress specifically vested the USDA National Appeals Division with the authority to determine appealability, the producers were out of luck. Again, a tough exception to sell to courts.

Equitable Estoppel

The Supreme Court and the Eighth Circuit don't like to evaluate estoppel claims against the government. They are cautioned to use estoppel sparingly against public entities because it's in the public's interest to uphold the rule of law.

To succeed on a claim of equitable estoppel against the government, a plaintiff has to prove all the elements of equitable estoppel and, toughest of all, show the government committed affirmative misconduct. That's a heavy burden that the producers couldn't meet because they couldn't establish the USDA committed affirmative misconduct.

Moral of the Story

The exceptions to the administrative exhaustion requirement are pretty limited, so if you have beef with the USDA, go up the administrative remedy ladder rather than try to take any shortcuts to litigation.

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