UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ROBERT A. HALSTEAD, JR.,
Plaintiff-Appellee,

v.
                                                                    No. 95-3199
FEDERAL CROP INSURANCE
CORPORATION; UNITED STATES
DEPARTMENT OF AGRICULTURE,
Defendants-Appellants.

Appeal from the United States District Court
for the Eastern District of North Carolina, at New Bern.
Malcolm J. Howard, District Judge.
(CA-94-76-4-H1)

Argued: January 28, 1997

Decided: April 4, 1997

Before RUSSELL and WILKINS, Circuit Judges, and
OSTEEN, United States District Judge for the Middle District of
North Carolina, sitting by designation.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: Stephen Aubrey West, Assistant United States Attorney,
Raleigh, North Carolina, for Appellants. Myron Tayloe Hill, Jr.,
BROWNING & HILL, L.L.P., Greenville, South Carolina, for Appel-
lee. ON BRIEF: Janice McKenzie Cole, United States Attorney, Bar-
bara D. Kocher, Assistant United States Attorney, Raleigh, North
Carolina, for Appellants. Robert A. Cox, Jr., BROWNING & HILL,
L.L.P., Greenville, South Carolina, for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Robert Halstead is a tobacco farmer in Pitt County, North Carolina.
In 1992, he purchased a general insurance policy from the Federal
Crop Insurance Corporation ("FCIC") to cover nine units, or approxi-
mately 65 acres, of tobacco crop. Under the terms of the policy, the
FCIC agreed to insure against unavoidable loss caused by adverse
weather conditions so long as Halstead harvested his crop by any rec-
ognized good farming practice. In addition, the policy required that
the stalks of any tobacco subject to a claim not be cut without the
FCIC's approval.

On July 20, 1992, Halstead reported anticipated losses on units 105
and 107 due to hail damage suffered during a storm. FCIC inspectors
surveyed the damage and determined that it was not severe. In their
report, the inspectors noted that Halstead should have been able to
produce the appraised amount of tobacco from these units if no fur-
ther damage occurred.

During August 1992, however, over twelve inches of rain fell in
Pitt County within a nine-day period. The United States Department
of Agriculture declared Pitt County a contiguous disaster area. Farm-
ers in the area, including Halstead, experienced great difficulty in har-
vesting their tobacco crops due to the wetness of the fields. After his
attempts to use an automatic harvester failed, Halstead switched to a
manual harvester, only to find that his efforts were futile because the
manual harvester also became stuck in the mud. Halstead later testi-

                     2
fied that he employed manual laborers and tried harvesting the
tobacco by hand.

On September 7, 1992, Halstead contacted his insurance agent to
report losses to units 101, 103, 105, 106, and 107 due to his inability
to harvest because of the wet weather. The FCIC sent two inspectors,
Bealie Martin and Mitchell Buck, to appraise the damage. At that
point, Halstead had harvested all but twelve of the sixty-five insured
acres of tobacco.

The inspectors found that the stalks on unit 103 had been cut by
the owner of the land without Halstead's knowledge. On the units that
had not been cut, units 101, 105, 106 and 107, the inspectors found
that small areas had been damaged by excessive rainfall, but that most
of the tobacco had suffered heat damage from neglect. In support of
their conclusion, the inspectors noted that there were no noticeable
ruts in the field to indicate that Halstead had tried to harvest the
tobacco during the wet weather.

In a letter dated December 2, 1992, the FCIC denied Halstead
indemnity on all five units based on his failure to follow good farming
practices and give timely notice of loss. Halstead twice appealed the
decision in informal hearings held before FCIC hearing officers in
Rosslyn, Va. The first hearing officer was from the midwest and Hal-
stead was forced to explain to him how flue-cured tobacco is har-
vested. Halstead and his insurance agent testified at both hearings, but
no witnesses appeared on behalf of the FCIC. Therefore, Halstead and
the hearing officers did not have the opportunity to question the
inspectors concerning their reports.

Halstead's appeals were denied for the following reasons: 1) Hals-
tead failed to follow recognized good harvesting practices because he
allowed the crop to deteriorate in the field without attempting to har-
vest by alternative methods; 2) Halstead failed to meet the policy
requirement to provide notice of loss within 72 hours of the discovery
of probable loss; and 3) Halstead failed to obtain written consent from
the FCIC before destroying the unharvested crop on unit 103.

Having exhausted his right to administrative appeal, Halstead filed
a complaint in the United States District Court for the Eastern District

                    3
of North Carolina on June 16, 1994 pursuant to 7 U.S.C. § 1508(f).
The district court granted the FCIC's motion to hear the case on the
briefs, but decided to hold a limited "evidentiary hearing" in order to
"better understand the facts in this matter."

The hearing lasted less than one day. Halstead and his insurance
agent again testified. Halstead also presented two new witnesses, a
neighbor and a summer employee, both of whom supported Hals-
tead's claim that he attempted to harvest the crop by hand. Mitchell
Buck, one of the inspectors, appeared on behalf of the FCIC.

On October 26, 1995, the district court issued an order finding that
the decisions of the administrative agency concerning the issues of
untimely notice and Halstead's failure to follow good farming prac-
tices were "arbitrary and capricious" and not supported by substantial
evidence. The district court reversed the agency's denial of indemnity
on units 101, 105, 106, and 107. On unit 103, however, the district
court upheld the FCIC's denial of indemnity because the stalks had
been cut without the consent of the agency. Halstead was awarded
$37,674.14 plus interest.

The FCIC appeals the district court's decision on two grounds.
First, the FCIC claims that the district court erred in conducting an
evidentiary hearing rather than relying on the administrative record.
Second, the FCIC claims that the district court erred in finding that
the agency's decision that Halstead did not give timely notice was
"arbitrary and capricious."

The parties do not dispute that the applicable standard of review
under the Administrative Procedure Act ("APA") is whether the
FCIC's decision was "arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with the law."1 They vigorously disagree,
however, whether the district court overstepped the boundaries of its
scope of review by holding an evidentiary hearing. In deciding
whether an agency's decision was "arbitrary and capricious," a
reviewing court "must consider whether the decision was based on a
consideration of the relevant factors and whether there has been a
_________________________________________________________________

1 5 U.S.C.A. § 706(2)(A) (West 1996).

                    4
clear error of judgment."2 Although the Supreme Court has held that
"the focal point for judicial review should be the administrative
record already in existence,"3 it has not forbidden the examination of
extrinsic evidence.

The Fourth Circuit has not established guidelines concerning the
proper scope of review under the APA, and we decline to do so today.
The Ninth Circuit, however, has held that a reviewing court may go
outside the record to obtain background information or evidence of
whether the agency considered all relevant factors or fully explicated
its course of conduct.4 The reviewing court is limited in its use of this
evidence. As noted by the Supreme Court in Florida Power & Light
Co. v. Lorion: "If the record before the agency does not support the
agency action, if the agency has not considered all relevant factors,
or if the reviewing court simply cannot evaluate the challenged
agency action on the basis of the record before it, the proper course,
except in rare circumstances, is to remand to the agency for additional
investigation or explanation."5 Unfortunately, the Court failed to offer
an example of "rare circumstances" and our case law provides little
guidance.6

Confining reviewing courts to the agency record rests on an impor-
tant practical consideration. The Seventh Circuit strictly limits the use
of evidentiary hearings because "[a]dministrative agencies deal with
technical questions, and it is imprudent for the generalist judges of the
federal district courts and courts of appeals to consider testimonial
and documentary evidence bearing on those questions unless the evi-
dence has first been presented to and considered by the agency."7 Hal-
_________________________________________________________________
2 Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416
(1971).
3 Camp v. Pitts, 411 U.S. 138, 142 (1973) (per curiam).
4 Asarco, Inc. v. United States Environmental Protection Agency, 616
F.2d 1153, 1160 (9th Cir. 1980).
5 470 U.S. 729, 744 (1985).
6 Compare McGlone v. Heckler, 791 F.2d 1119, 1120 (4th Cir. 1986)
(allowing consideration of additional evidence submitted to district
court), with Maxey v. Califano, 598 F.2d 874, 876 (4th Cir. 1979)
(remanding to agency for examination of relevant evidence).
7 Cronin v. United States Department of Agriculture, 919 F.2d 439, 444
(7th Cir. 1990) (evidentiary hearing only appropriate in "emergency").

                    5
stead's case, however, does not present a technical question which
must be left to the expertise of the FCIC. The main issue is witness
credibility. Either Halstead attempted to harvest the tobacco by any
means possible and contacted his insurance agent as soon as he was
aware of the extent of the damage to the crop, demonstrating his use
of "good farming practices" and the giving of timely notice, or he did
not, resulting in a breach of his insurance policy.

Over three years after Halstead's initial claim the district court was
the first reviewing body to address all of the relevant factors in the
dispute.8 In order to conserve government resources, and in the inter-
est of equity, we affirm the district court's use of an evidentiary hear-
ing and its overall disposition of the case.

AFFIRMED
_________________________________________________________________
8 We take judicial notice that the procedure for appeals from adverse
decisions by FCIC agents recently has been changed to allow for local
levels of appeal and mediation prior to an appearance before a hearing
officer from the National Appeals Division. See National Appeals Divi-
sion Rules of Procedure, 60 Fed. Reg. 67298, 67316 (1995) (to be codi-
fied at 7 C.F.R. pt. 780).

                     6
