                                                                         FILED
                                                            United States Court of Appeals
                                                                    Tenth Circuit

                                                                    May 19, 2010
                    UNITED STATES COURT OF APPEALS
                                                 Elisabeth A. Shumaker
                                                                    Clerk of Court
                                 TENTH CIRCUIT



 CRAIG D. KROSKOB, and LISA D.
 KROSKOB,

               Plaintiffs-Appellants,                     No. 09-1209
          v.                                             (D. of Colo.)
 UNITED STATES DEPARTMENT                        (D.C. No. 08-CV-1009-RPM)
 OF AGRICULTURE; TOM
 VILSACK, * Secretary of the United
 States Department of Agriculture;
 FARM SERVICE AGENCY, an
 agency of the United States
 Department of Agriculture; TERESA
 LASSETER, Administrator of the
 Farm Service Agency; LEWIS
 FRANK, State Executive Director for
 the Colorado Farm Service Agency;
 SCOTT A. MILLER, Farm Manager
 for the Farm Service Agency; BRYAN
 COOK, Farm Loan Manager for the
 Farm Service Agency, all in their
 official capacity,

               Defendants-Appellees.


                           ORDER AND JUDGMENT **


      *
       Pursuant to Federal Rule of Appellate Procedure 43(c)(2), in this case
Defendant-Appellee Tom Vilsack, sworn in January 21, 2009, is substituted for
Ed Schafer as the Secretary of the United States Department of Agriculture.
      **
         This order and judgment is not binding precedent except under the
doctrines of law of the case, res judicata and collateral estoppel. It may be cited,
however, for its persuasive value consistent with Fed. R. App. P. 32.1 and 10th
                                                                        (continued...)
Before TYMKOVICH, EBEL, and ALARCÓN ***, Circuit Judges.


      Craig and Lisa Kroskob appeal the dismissal of their suit against the U.S.

Department of Agriculture’s Farm Service Agency (FSA). The appeal arises from

the FSA’s decision that the Kroskobs’ family farm loan does not qualify for

restructuring. The Kroskobs administratively appealed that decision to an internal

FSA review board pursuant to 7 U.S.C. § 6991 et seq. The review board ordered

the FSA to reassess the family’s restructuring request. Some time passed, and

frustrated by the FSA’s delay in issuing a new loan decision, the Kroskobs

brought suit in federal court to compel the FSA to act. While their case was

pending, the FSA issued a new decision, which the district court held mooted the

Kroskobs’ action.

      On appeal, the Kroskobs argue the FSA’s new decision contains a number

of errors. We hold the Kroskobs’ case is not moot, but also conclude they have

not exhausted their administrative remedies. Exercising jurisdiction under 18

U.S.C. § 1291, we therefore AFFIRM the district court’s dismissal of the

Kroskobs’ case.



      **
        (...continued)
Cir. R. 32.1.
      ***
         The Honorable Arthur L. Alarcón, Senior Circuit Judge, United States
Court of Appeals for the Ninth Circuit, sitting by designation.

                                       -2-
                                   I. Background

      Between 2001 and 2006, the Kroskobs and the FSA entered into a number

of loan agreements to support the operation of the Kroskobs’ farm in Fort

Morgan, Colorado. The first loan in 2001 was an emergency loan secured by title

to the Kroskobs’ land and farm equipment. Over the next five years, the

Kroskobs continued to have financial difficulties, which resulted in their

bankruptcy, restructuring of debt, including the FSA loans, and eventual default

on the restructured loans. Beginning in 2006, the FSA garnished federal

payments to the Kroskobs to compensate for their default.

      The Kroskobs sought another loan from the FSA in 2006. To determine

loan eligibility, the agency entered the Kroskobs’ current financial information

into its computerized Debt and Loan Restructuring System (DALR$). The

DALR$ analysis showed no feasible restructuring plan was available to the

Kroskobs, and they were informed that the FSA could not provide additional

lending. In March 2007, the Kroskobs provided updated information to the FSA,

but once again the DALR$ analysis showed the agency was unable to provide the

family with a restructured loan.

      Dissatisfied with the FSA’s decision, in December 2007 the Kroskobs

challenged the FSA’s failure to restructure their loans before the National

Appeals Division (NAD). The NAD is an appeals body within the Department of

Agriculture charged with reviewing certain decisions made by the Department,

                                        -3-
including lending decisions under the Agricultural Credit Act of 1987, 7 U.S.C.

§ 2001. In the course of the appeal, the NAD determined among other things that

incorrect information had been inputted into DALR$. The NAD believed the

incorrect information materially affected certain aspects of the FSA’s decision,

but the NAD could not determine from the record before it whether the Kroskobs

would qualify for debt restructuring based on revised financial information. The

NAD made clear that it was not making a ruling on the merits of the Kroskobs’

appeal: “Because not all information used in DALR$ was correct, whether [the

Kroskobs’] cash flow is enough to develop a feasible plan is unknown.” Aplt.

App., Vol. 2 at 456. The NAD remanded the matter to the FSA.

      Following the NAD’s decision, representatives of the FSA and the

Kroskobs met in early February 2008 to discuss the matter. The agency then sent

the Kroskobs a request for updated financial information. It is unclear from the

record when the FSA received updated information from the Kroskobs, but in any

event no new decision was forthcoming from the FSA.

      Relying on a statutory command that requires Department of Agriculture

agencies to “implement the [NAD’s] final determination not later than 30 days

after the effective date of the notice of the final determination,” 7 U.S.C.

§ 7000(a), the Kroskobs filed suit in mid-2008 in federal district court to compel

the agency to act. They argued that the NAD’s determination entitled them to




                                          -4-
debt restructuring as a matter of right, and urged the district court to order the

FSA to restructure their debt.

      In February 2009, while the case was pending in district court, the FSA

issued a new decision. The new decision concluded that the Kroskobs did not

qualify for debt restructuring. Among other things, the FSA decision found the

Kroskobs had acted in bad faith by failing to provide the FSA with records

concerning the farm’s crops, and the Kroskobs had no permissible reason for their

loan payment delinquency. The decision also outlined the Kroskobs’ right to

administratively appeal the decision pursuant to agency regulations and statutory

law. Within the 30-day appeal period, the Kroskobs sent a letter to the FSA

requesting reconsideration of the decision. In light of these developments, the

district court determined it lacked subject matter jurisdiction on mootness grounds

and dismissed the Kroskobs’ complaint.

                                    II. Discussion

      The Kroskobs argue their case still presents a justiciable controversy

because the FSA’s latest restructuring decision did not properly implement the

NAD’s determination. Concluding that the Kroskobs have yet to exhaust their

administrative remedies before the NAD, we agree with the district court’s

dismissal.




                                          -5-
      A. Standard of Review

      We review de novo the district court’s legal conclusion that a case is moot,

see Wilderness Soc’y v. Kane County, 581 F.3d 1198, 1214 (10th Cir. 2009),

reh’g en banc granted, 595 F.3d 1119 (10th Cir. 2010), and we review for clear

error the district court’s findings of jurisdictional facts, see Butler v. Kempthorne,

532 F.3d 1108, 1110 (10th Cir. 2008). “Because the jurisdiction of federal courts

is limited, there is a presumption against our jurisdiction, and the party invoking

federal jurisdiction bears the burden of proof.” Marcus v. Kan. Dep’t of Revenue,

170 F.3d 1305, 1309 (10th Cir. 1999) (internal punctuation omitted).

      B. Mootness and Exhaustion

      The Kroskobs argued before the district court that the FSA harmed them by

failing to reissue a DALR$ analysis after the NAD directed it to do so. They

contend that from the time they filed their suit in 2008 until February 2009, the

FSA did not update their DALR$ information, and thus did not meet the 30-day

statutory deadline for implementing the NAD’s determination—although the

reasons for the delay are in dispute.

      “Article III mootness is the doctrine of standing set in a time frame: The

requisite personal interest that must exist at the commencement of the litigation

(standing) must continue throughout its existence (mootness).” S. Utah

Wilderness Alliance v. Smith, 110 F.3d 724, 727 (10th Cir. 1997) (internal

punctuation omitted). “If an event occurs while a case is pending that heals the

                                          -6-
injury and only prospective relief has been sought, the case must be dismissed.”

Id.; see also City of Herriman v. Bell, 590 F.3d 1176, 1181 (10th Cir. 2010) (“Our

Article III case-or-controversy requirement continues through all stages of federal

judicial proceedings.”).

      As the Kroskobs framed their case in district court, when the FSA issued its

new decision in February 2009 they obtained their desired relief—the FSA

implemented the NAD’s final determination of their appeal. But they contend on

appeal the district court misapprehended the relief they sought. They contend the

FSA’s February 2009 decision does not moot their claims since the NAD’s

determination did not allow the FSA discretion to reject their application a second

time, but instead required the FSA to grant the requested loan restructuring. In

other words, their complaint of agency inaction may well be moot, but they still

contend the agency erred in implementing the NAD’s remand order.

      The problem with this argument is that it challenges ongoing agency action

for which no final determination has been made. The agency has not finally

resolved their claim. Because the Kroskobs have failed to exhaust their

administrative remedies, their federal claim is premature.

      As a matter of basic administrative law principles, “[o]ne challenging an

agency decision must exhaust all administrative remedies before seeking judicial

review.” 33 C HARLES A LAN W RIGHT ET AL ., F EDERAL P RACTICE AND P ROCEDURE

§ 8398 (1st ed. 2005). As one court summarized:

                                        -7-
      The exhaustion requirement serves four primary purposes. First, it
      carries out the congressional purpose in granting authority to the agency
      by discouraging the “frequent and deliberate flouting of administrative
      processes [that] could . . . encourag[e] people to ignore its procedures.”
      Second, it protects agency autonomy by allowing the agency the
      opportunity in the first instance to apply its expertise, exercise whatever
      discretion it may have been granted, and correct its own errors. Third,
      it aids judicial review by allowing the parties and the agency to develop
      the facts of the case in the administrative proceeding. Fourth, it
      promotes judicial economy by avoiding needless repetition of
      administrative and judicial factfinding, and by perhaps avoiding the
      necessity of any judicial involvement at all if the parties successfully
      vindicate their claims before the agency.

Andrade v. Lauer, 729 F.2d 1475, 1484 (D.C. Cir. 1984) (internal citation

omitted).

      These principles apply here. Under federal law pertaining to the farm loan

program, a challenge to FSA final decisions requires litigants to “exhaust all

administrative appeal procedures established by the Secretary [of Agriculture] or

required by law before the person may bring an action in a court of competent

jurisdiction against” the Department of Agriculture. 7 U.S.C. § 6912(e)

(emphasis added); see also Forest Guardians v. U.S. Forest Serv., 579 F.3d 1114,

1121 (10th Cir. 2009) (“The courts of appeals are split as to whether 7 U.S.C.

§ 6912(e) is jurisdictional. . . . Regardless of whether it is jurisdictional, the

explicit exhaustion requirement in § 6912(e) is, nonetheless, mandatory.”).

      The Kroskobs have not completed the “administrative appeal procedures”

set forth in the statutory scheme. Following the FSA’s February 2009 decision,


                                           -8-
the Kroskobs’ attorney wrote the FSA’s Acting State Executive Director “to

request reconsideration” of the agency’s decision. Aplt. App., Vol. 2 at 492.

Pursuant to this request, the Kroskobs were entitled to an informal hearing with

the FSA. See 7 U.S.C. § 6995(a) (“If an officer, employee, or committee of an

agency makes an adverse decision, the agency shall hold, at the request of the

participant, an informal hearing on the decision.”).

      The informal hearing process does not satisfy the Kroskobs’ administrative

exhaustion requirement. The statute makes clear that only an NAD determination

—not an informal hearing—serves as a precursor to federal court action. See 7

U.S.C. § 6997(d) (designating an NAD hearing officer’s determination an

“administratively final determination”); 7 U.S.C. § 6999 (“A final determination

of the Division shall be reviewable and enforceable by any United States district

court of competent jurisdiction . . . .”); see also 7 U.S.C. § 6912(e) (“[A] person

shall exhaust all administrative appeal procedures established by the Secretary or

required by law before the person may bring an action in a court of competent

jurisdiction against” the Department of Agriculture.). Thus, for the Kroskobs to

seek relief in federal court, they must appeal the FSA’s February 10, 2009

decision to the NAD. If they are dissatisfied with the NAD’s determination, at

that time the Kroskobs may either bring an action in federal court, see 7 U.S.C.

§ 6997(d), or seek formal review from the NAD’s Director, which also can be

challenged in federal court, see 7 U.S.C. § 6998.

                                         -9-
      Pursuant to these statutes, the Kroskobs have yet to exhaust their

administrative appeals of the FSA’s February 2009 decision. In those

proceedings, the Kroskobs can argue to the agency that the FSA failed to comply

with the NAD’s remand decision. On appeal to the NAD, the Kroskobs also may

argue that the FSA need not update the financial information and the FSA lacked

the discretion to deny the application. The NAD is in the best position to

administratively review whether the FSA properly implemented the NAD’s 2006

determination. That is especially true in a case like this where the parties

strongly disagree about the meaning of the 2006 order and the FSA’s obligations

on remand. 1

      In sum, until final agency review occurs, we do not have jurisdiction to

review the Kroskobs’ claims.

                                  III. Conclusion

      For the foregoing reasons, we AFFIRM the district court’s dismissal of the

Kroskobs’ case.

                                                     Entered for the Court,

                                                     Timothy M. Tymkovich
                                                     Circuit Judge


      1
          The Kroskobs suggest further appeals to the NAD would leave them in
agency limbo. The record does not support this contention, and no showing of
futility is obvious to us. Once the NAD makes its final review of the FSA’s
February 2009 decision, that determination can be appealed to district court. See
7 U.S.C. §§ 6997(d), 6999.

                                         -10-
