        RECOMMENDED FOR FULL-TEXT PUBLICATION
             Pursuant to Sixth Circuit Rule 206           2      Fullenkamp, et al., v. Veneman            No. 03-3731
    ELECTRONIC CITATION: 2004 FED App. 0294P (6th Cir.)
                File Name: 04a0294p.06                    Clair, UNITED STATES DEPARTMENT OF JUSTICE,
                                                          Washington, D.C., for Appellee. ON BRIEF: Benjamin F.
                                                          Yale, Ryan K. Miltner, Kristine H. Reed, BENJAMIN F.
UNITED STATES COURT OF APPEALS                            YALE & ASSOC. CO., Waynesfield, Ohio, for Appellants.
                                                          Jeffrey Clair, UNITED STATES DEPARTMENT OF
               FOR THE SIXTH CIRCUIT                      JUSTICE, Washington, D.C., for Appellee.
                 _________________
                                                                               _________________
 MICHAEL FULLENKAMP , et al., X
          Plaintiffs-Appellants, -                                                 OPINION
                                    -                                          _________________
                                    -  No. 03-3731
             v.                     -                        MARTHA CRAIG DAUGHTREY, Circuit Judge. The
                                     >                    plaintiffs in this case are dairy farmers who annually produce
                                    ,                     over 2.4 million pounds of milk. They challenge the
 ANN M. VENEMAN, in her             -
 capacity as Secretary of the                             regulations promulgated by the defendant Secretary of
                                    -                     Agriculture to implement the federal Milk Income Loss
 United States Department of        -                     Contract Program, 7 U.S.C. § 7982. When a producer signs
 Agriculture,                       -                     a contract to join the program, it begins receiving monthly
           Defendant-Appellee. -                          payments on the eligible milk it produces and, under the
                                    -                     statute’s transition rule, a lump-sum payment for eligible milk
                                   N                      it produced between December 1, 2001, and the month before
       Appeal from the United States District Court       the contract was signed. The statute includes a limitation
      for the Northern District of Ohio at Cleveland.     restricting the quantity of milk upon which payment can be
       No. 02-07431—Ann Aldrich, District Judge.          made each fiscal year to 2.4 million pounds. The Department
                                                          of Agriculture regulations under attack here apply the
                  Argued: June 17, 2004                   limitation to payments under the transition rule as well as to
                                                          the monthly payments. The district court found that the
         Decided and Filed: September 2, 2004             statute did not unambiguously forbid the Secretary’s
                                                          interpretation of the statute and, moreover, that the
 Before: DAUGHTREY, GIBBONS, and COOK, Circuit            Secretary’s interpretation was reasonable. The court therefore
                   Judges.                                denied the plaintiffs’ motion for injunctive relief and granted
                                                          the Secretary’s motion to dismiss.
                   _________________
                                                              For the reasons set out below, we affirm.
                       COUNSEL
ARGUED: Benjamin F. Yale, BENJAMIN F. YALE &
ASSOC. CO., Waynesfield, Ohio, for Appellants. Jeffrey

                             1
No. 03-3731             Fullenkamp, et al., v. Veneman       3    4      Fullenkamp, et al., v. Veneman              No. 03-3731

   FACTUAL AND PROCEDURAL BACKGROUND                                    (2) Limitation. The payment quantity for all
                                                                      producers on a single dairy operation during the months
   On May 13, 2002, President Bush signed into law the Farm           of the applicable fiscal year for which the producers
Security and Rural Investment Act of 2002, Pub. L. No. 107-           receive payments under subsection (b) shall not exceed
171, 116 Stat. 134 (2002), which, in § 1502, created an               2,400,000 pounds. . . .
income support program for dairy farmers that provides for
direct federal payments to milk producers when a specific                                     *****
statutorily-prescribed price index falls below a certain level.
 See id. at § 1502, codified at 7 U.S.C. § 7982. In order to          (f) Signup. The Secretary shall offer to enter into
receive payments through the program, dairy farmers must              contracts under this section during the period beginning
enter into a contract with the Secretary of Agriculture. Once         on the date that is 60 days after the date of enactment of
a dairy farmer has entered into a contract, the farmer is             this Act [May 13, 2002], and ending on September 30,
eligible for two categories of payments: (1) monthly                  2005.
payments on eligible production beginning the month the
farmer enters into the contract and ending September 30,                                      *****
2005, see 7 U.S.C. § 7982(g); and (2) a retroactive, lump-sum
payment for production during the “transition” period                 (h) Transition rule. In addition to any payment that is
between December 2001 and the month in which the farmer               otherwise available under this section, if the producers on
enters the contract. See § 7982(h). The statute does not              a dairy farm enter into a contract under this section, the
specify a month in which dairy farmers must enter contracts,          Secretary shall make a payment in accordance with the
just that the Secretary must offer such contracts from July           formula specified in subsection ( c) on the quantity of
2002 until September 2005. See 7 U.S.C. § 7982(f).                    eligible production of the producer marketed during the
                                                                      period beginning on December 1, 2001, and ending on
  Section 7982 reads, in pertinent part:                              the last day of the month preceding the month the
                                                                      producers on the dairy farm entered into the contract.
  (b) Payments. The Secretary shall offer to enter into
  contracts with producers on a dairy farm located in a             In October 2002, the Secretary of Agriculture issued
  participating State under which the producers receive           regulations implementing the dairy assistance program.
  payments on eligible production.                                Under the regulations, the cap in § 7982(d)(2) limiting
                                                                  payment quantity to 2.4 million pounds of milk per year was
                          *****                                   made applicable to transition period payments under
                                                                  § 7982(h), as well as to the monthly payments for milk
  (d) Payment quantity.                                           produced after a contract has been signed. See 7 C.F.R.
                                                                  §§ 1430.207(b). In response, the plaintiffs filed this action,
     (1) In general. Subject to paragraph (2), the payment        seeking a declaratory judgement that dairy producers who are
  quantity for a porducer during the applicable month             entitled to payments during the transition period are entitled
  under this section shall be equal to the quantity of            to a lump-sum payment on all the milk produced and
  eligible production marketed by the producer during the         marketed during the transition period, not just 2.4 million
  month.                                                          pounds a year. They requested an injunction compelling the
No. 03-3731                  Fullenkamp, et al., v. Veneman                5    6     Fullenkamp, et al., v. Veneman                     No. 03-3731

Secretary to modify the regulations at 7 C.F.R. § 1430 to                       interpretation of a statute it administers, we must first ask
allow dairy producers uncapped transition payments.                             “whether Congress has directly spoken to the precise question
                                                                                at issue.” Id. at 842. If, after “employing traditional tools of
  The district court denied the plaintiffs’ motion for                          statutory construction,” id. at 843 n.9, we determine that
injunctive relief and granted the Secretary’s motion to dismiss                 Congress’s intent is clear, then “that is the end of the matter;
the case.1 With respect to the cap on transition payments, the                  for the court, as well as the agency, must give effect to the
court found that § 7982 does not unambiguously forbid the                       unambiguously expressed intent of Congress.” Id. at 842-43.
regulations from making transition payments subject to the                      However, “if the statute is silent or ambiguous with respect to
cap and that the Secretary’s regulation was permissible and                     the specific issue, the question for the court is whether the
reasonable. Applying Chevron deference, the court upheld                        agency’s answer is based on a permissible construction of the
the Secretary’s determination that the cap applies to transition                statute.” Id. at 843; see also Barnhart v. Thomas, 124 S.Ct.
payments as well as prospective payments under the contract.                    376, 380 (2003) (applying Chevron).
See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc.,
467 U.S. 837, 842-43 (1984). This appeal followed.                              II. The Application of the Cap to Transition Payments
                              ANALYSIS                                            Both the plaintiffs and the defendant in this case argue that
                                                                                Congress spoke directly to the issue of whether the payment
I. Standard of Review                                                           cap in § 7982(d)(2) applies to transition payments.
                                                                                Obviously, however, they do not agree on what Congress
  The parties agree that Chevron, 467 U.S. 837, governs this                    said. The plaintiffs argue that Congress clearly intended that
case.2    Under Chevron, in reviewing an agency’s                               the cap not apply to transition payments and that the
                                                                                Secretary’s regulations therefore violate the statute. The
                                                                                Secretary, on the other hand, contends that Congress clearly
    1
      The defendant’s motion was styled a motion to dismiss under Rule          intended that all payments under § 7982 would be limited by
12(b)(1) of the Federal Rules of Civil Procedure or, in the alternative, for    the cap and that the Department’s regulations are consistent
summary judgment under Rule 56. The d istrict court said it was granting        with the statute. Both parties argue that the plain language of
the defendant’s motion to dismiss, but also made clear that it was
considering the case on the merits and not dismissing based on subject
                                                                                the statute, legislative history, and the structure and purpose
matter jurisdiction. It therefore appears that it was either a dismissal for    of the statute support their positions.
failure to state a claim or a grant of summary judgment rather than a
dismissal for lack of subject matter jurisdiction. Even if the dismissal
were considered a dismissal for lack of subject matter jurisdiction, we can
affirm a district court’s judgment on any grounds supported by the record.
See Peterson Novelties, Inc. v. City of Berkley, 305 F.3d 38 6, 394 (6th Cir.
2002).

    2
      Chevron deference is appropriate “when it appears that Cong ress          promulgate appropriate regulations necessary to implement the chapter.
delegated authority to the agency generally to make rules carrying the          It specified that those regulations were to be made without regard to
force of law, and that the agency interpretation claiming deference was         notice and comment rule-making procedures. The regulations at issue in
promulgated in the exercise of that authority.” United States v. Mead           this case, final regulations made without prior notice and comment, were
Corp., 533 U.S. 218, 226-27 (2001) . In 7 U.S .C. § 7991(c), C ongress          promulgated under the authority given to the Secretary in § 7991 (c). See
authorized the Secretary and C omm odity C redit Corporation to                 67 Fed. Reg. 64 454 (O ct. 18, 2002).
No. 03-3731             Fullenkamp, et al., v. Veneman          7    8        Fullenkamp, et al., v. Veneman                      No. 03-3731

1. Statutory Language                                                that orders the Secretary to offer to enter into contracts with
                                                                     dairy farmers under which the farmers will receive payment
   In statutory construction cases, “[t]he first step ‘is to         for eligible milk production. The plaintiffs assert that
determine whether the language at issue has a plain and              transition payments are not payments under subsection (b).
unambiguous meaning with regard to the particular dispute in         They maintain that § 7982 creates two similar but distinct
the case.’” Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438,         programs that cover farmers during different periods – one,
450 (2002) (citation omitted). The plaintiffs argue that the         described in subsection (e), that covers farmers during the
plain language of § 7982 unambiguously requires the                  period after they sign contracts and another, described in
Secretary to make transition payments without limitation.            subsection (h), that covers farmers for the period before they
They point out that subsection (h) requires payment on               sign contracts – and that “payments under subsection (b)”
eligible production and note that Congress did not limit the         refers to the payments under the first program, not the second.
definition of “eligible production” in either subsection (a) or      They argue that interpreting “payments under subsection (b)”
(h). They argue that if Congress had intended the cap to             to include both transition and monthly payments renders the
apply to transitional payments, it could have written the            phrase “subsection (b)” superfluous, since, under such an
statute to say so in subsection (h) itself. As the Secretary         interpretation, the limitation could have been written to just
points out, however, subsection (h) provides that payments           read: “payments under this section.” As the plaintiffs point
shall be made according to the formula in subsection (c),3           out, however, citing to Director, Office of Workers’
which incorporates the payment quantity in subsection (d),           Compensation Programs, United States Department of Labor
the subsection that includes the payment cap. Thus,                  v. Goudy, 777 F.2d 1122, 1127 (6th Cir. 1985), statutes
according to this reading of the statute, the fact that              should be read to give every word and clause effect. Citing
subsection (h) itself does not include a limitation on quantity      to other canons of statutory interpretation, the plaintiffs also
is not determinative because the payment formula for which           assert that the statute is remedial and should be construed
it provides incorporates the payment cap in subsection (d)(2).       liberally in favor of the beneficiaries.
  By its terms, however, the payment cap in subsection (d)(2)          In response, the Secretary asserts that transition payments
applies only to “payments under subsection (b).” Thus, the           are “payments under subsection (b).” She points out that
central question in this case is whether transition payments         dairy farmers receive transitional payments only if they sign
are “payments under subsection (b),” the section of the statute      contracts, as authorized in subsection (b). She further notes
                                                                     that in excepting payments under subsection (h) from the
                                                                     payments that start on the first day of the month in which the
   3
                                                                     contract is signed, subsection (g)4 contemplates that payments
    Subsec tion (c), entitled “amount,” provides as follows:
       Paym ents to a producer under this section shall be
   calculated by multiplying (as determined by the Secretary) –          4
       (1) the payment quantity for the producer during the                  Subsection (g), entitled “duration of contract,” provides as follows:
       applicable month established under subsection (d);                       (1) In general. Except as provided in paragraph (2) and
       (2) the amount equal to –                                                subsection (h), any contract entered into by producers on a
            (A) $16.94 p er hundredweight; less                                 dairy farm under this section shall cover eligib le production
            (B) the Class I milk price per hundredweight in Boston              marketed by the producers on the dairy farm during the
            under the applicable Federal milk marketing order; by               period starting with the first day of [the] month the
       (3) 45 percent.                                                          producers on the dairy farm enter into the contract and
No. 03-3731                 Fullenkamp, et al., v. Veneman     9    10    Fullenkamp, et al., v. Veneman                No. 03-3731

under subsection (h) are payments covered by the contract.          of the statute sufficiently clarify the ambiguity in the statutory
She contends that if Congress had intended to limit the cap to      language. See Gen. Dynamics Land Sys., Inc. v. Cline, 124
the monthly contract payments, it would have made more              S.Ct. 1236, 1248 (2004) (looking to text, structure, purpose,
sense to have the limit apply to “payments under subsections        and history of Act to find it unambiguous); United States v.
(e)-(g),” the subsections dealing with the monthly payments,        Choice, 201 F.3d 837, 841 (6th Cir. 2000) (explaining that the
rather than to “payments under subsection (b),” the subsection      plain language of the statute is the starting point for statutory
discussing the contracts in general. Furthermore, the               interpretation, but that the structure and language of the
Secretary questions whether the canons of statutory                 statute as a whole can aid in interpreting the plain meaning
interpretation cited by the plaintiffs are relevant here, arguing   and that legislative history can be looked to if the statutory
that the program is not remedial and that the cap is an             language is unclear).
eligibility limitation rather than an exception. Finally, she
contends that nothing in the structure or purpose of the statute       Both parties are able to explain how their position fits into
suggests that Congress intended to create two separate              the overall structure of the statute and furthers the statute’s
programs or to distinguish between the retroactive transitional     purpose. The Secretary asserts that her interpretation of the
payments and the prospective monthly payments.                      statute gives the cap a meaningful role in the statute’s
                                                                    operation, whereas the plaintiffs’ interpretation would largely
   Focusing on the statutory language, we conclude that it is       nullify the cap because large producers would be able to
unclear whether the phrase “payments under subsection (b)”          circumvent the cap by waiting until September 2005 to sign
includes transition payments or not. As the defendant points        a contract and then receive “transitional payments” for the
out, transition payments are received only if the dairy farmers     entire period between December 2001 and August 2005.
enter into contracts and, therefore, such payments can be seen
to be payments under subsection (b). At the same time, as             The plaintiffs object to this argument and to the district
noted by the plaintiffs, this interpretation does render the        court’s acceptance of it, asserting that the district court and
phrase “subsection (b)” superfluous. Furthermore, when              Secretary have usurped the role of Congress and injected their
subsection (e) refers to “a payment under a contract under this     own political viewpoints into a carefully-crafted
section,” it is referring to the monthly payments, thereby          congressional compromise.         Furthermore, they argue,
implying that transition payments are not considered                Congress intended for large producers to be able to avoid the
payments under § 7982 contracts. In short, we conclude that         production caps. They assert that the overall purpose of the
although Congress may have had an intent regarding whether          program was to assist dairy farmers and that Congress wanted
transition payments were “under subsection (b) ,” that intent       to cover all eligible production, but that it carefully
is not stated clearly in the language of the statute.               constructed the program in a way that would force large
                                                                    farmers to wait until the end of the covered period if they
2. Legislative History, Structure, and Purpose                      wanted to receive payments on all their eligible production in
                                                                    order to refrain from encouraging large farmers to further
  Neither the legislative history of the statute nor the parties’   increase production and in order to push costs of the program
explanations of how their interpretations further the purpose       to later fiscal years.
                                                                      Similarly, both parties cite legislative history that supports
                                                                    their positions. The plaintiffs claim that the transition
        ending on Septemb er 30, 200 5 . . . .
No. 03-3731             Fullenkamp, et al., v. Veneman      11    12    Fullenkamp, et al., v. Veneman               No. 03-3731

payments in § 7982 serve as a replacement for the Northeast         [T]he prospective “monthly” program which provides
Dairy Compact, which did not have production caps. As the           monthly payments . . . has a 2.4 million pound cap as set
Secretary points out, however, the Northeast Dairy Compact          forth in (d). . . . This “limitations” language was inserted
was not a federal assistance program but an agreement among         out of a concern that an uncapped program would lead to
Northeastern states to regulate prices. See Organic Cow,            significant increases in production of milk. Also, there
LLC v. Ctr. for New England Dairy Compact Research, 335             was a concern that farmers would reorganize in the future
F.3d 66, 67-68 (2d Cir. 2003) (describing the Compact). As          just to get higher payments under the national program.
the Secretary further notes, previous programs supporting
dairy farmers included payment caps or gave discretion to the       These concerns do not apply to the benefits paid out
Secretary, who then capped the amount of milk eligible for          under subsection (h) because farmers would need time
assistance. See, e.g., Omnibus Consolidated and Emergency           machines to go back in the past and increase their
Supplemental Appropriations Act, 1999, Pub. L No. 105-277,          production or to change their legal structure
§ 1111(d), 112 Stat. 2681 (1998) (providing $200 million to         retrospectively. Indeed, the amount of production
provide assistance to dairy producers “in a manner                  covered by (h) is the amount of “eligible production” as
determined by the Secretary”); Dairy Market Loss Assistance         defined in section [7982(a)(2)].
Program, 64 Fed. Reg. 24933 (May 10, 1999) (capping
payment to 2.6 million pounds). Similarly, both milk              148 Cong. Rec. S4032 (May 8, 2002) (statement of Sen.
assistance programs that were in the Farm Bill before it went     Leahy).
to conference included caps. See H.R. 2646, 107th Cong.
§ 132 (2002) (as amended and passed by Senate) (capping              In sum, looking at the statutory language, legislative
payment at lesser of average quantity of milk in which farmer     history, and overall structure and purpose of the statute, we
had interest during each of a specified three-year period or 8    find the intention of Congress with regard to the application
million pounds). In addition, the conference report does not      of the subsection (d)(2) cap to transition payments unclear.
mention a difference between monthly and transition
payments with regard to the payment cap, simply noting, in        3. Reasonableness
its description of the program, that: “Producers, on an              Under Chevron, if Congress has not spoken directly to the
operation-by-operation basis, may receive payments on no          question at issue, the Secretary’s interpretation of the statute
more than 2.4 million pounds of milk marketed per year.           will be upheld so long as it is reasonable. See Smiley v.
Retroactive payments will be made covering market losses          Citibank (S.D), N.A., 517 U.S. 735, 744-45 (1996) (“Since we
due to low prices since December 1, 2001.” H.R. Conf. Rep.        have concluded that the Comptroller's regulation deserves
No. 107-424 at 446 (2002), reprinted in 2002 U.S.C.C.A.N.         deference, the question before us is not whether it represents
141, 171.                                                         the best interpretation of the statute, but whether it represents
   At the same time, the plaintiffs point out that some           a reasonable one.”); see also Barnhart v. Thomas, 124 S.Ct.
members of Congress, particularly Senators Leahy and              at 382. In this instance, we conclude that the Secretary’s
Jeffords, indicated that they understood that the cap in § 7982   interpretation of the statute is imminently reasonable. As
was to be applied to the monthly payments and not to              discussed above, transition payments pursuant to subsection
transition payments.        Senator Leahy, for example, in        (h) could rationally be considered payments under subsection
discussing the Farm Bill’s conference report, noted that:         (b), because they are contingent upon the recipients signing
No. 03-3731            Fullenkamp, et al., v. Veneman     13

contracts authorized under subsection (b). Furthermore,
capping the transition payments along with the monthly
payments creates a consistency throughout the program and
ensures that the cap has a meaningful role in the statute.
                      CONCLUSION
  For the reasons set out above, we find that the Secretary’s
construction of the statute was permissible, and we therefore
AFFIRM the judgment of the district court in favor of the
defendant.
