FCIC Reaps Kisor Deference

A controversy decided in June, M&T Farms v. FCIC, No. 23-15837 (9th Cir. June 4, 2024), features the Ninth Circuit’s latest application of Kisor deference to an agency’s regulatory interpretation.

The case involved the Federal Crop Insurance Corporation (FCIC), which Congress created “to improv[e] the economic stability of agriculture.” 7 U.S.C. § 1502(a). The agency carries out this mandate by offering reinsurance to private providers of crop insurance. To qualify for federal reinsurance, private providers must comply with FCIC regulations, which affects the terms and conditions of individual crop insurance policies. When disagreements arise between the insurer and claimants, the parties may seek clarification of legal issues from the FCIC. See 7 U.S.C. § 1506(r).

Thus, in September of 2020, the FCIC resolved a request to interpret the phrase “farming activity” in a regulatory document pertaining to program eligibility. The requester, M&T Farms, advanced an interpretation that “farming activity” is limited to the actual production of agricultural commodities. But the FCIC disagreed. As the agency read it, “farming activity” is broad enough to include the marketing and sale of agricultural commodities, and not just their production.

The practical result of the agency’s interpretation was the denial of M&T Farms’s $2 million claim, despite having paid the premiums.

M&T Farms sought judicial review in federal district court, arguing that the FCIC’s interpretation of “farming activity” is arbitrary and capricious under § 706 of the Administrative Procedure Act. With the parties’ consent, Magistrate Judge Susan G. Van Keulen presided. In March of 2023, she granted summary judgment to the government. See M&T Farms v. FCIC, 5:21-cv-09590-SVK (N.D. Cal. Mar. 9, 2023).

In sustaining the FCIC, Judge Van Keulen relied on Auer deference to an agency’s regulatory interpretation, which she granted after applying the five-factor test established in Kisor v. Wilkie:

1. Is the regulation “genuinely ambiguous”?
2. Is it reasonable?
3. Is it the agency’s “authoritative” interpretation?
4. Does the interpretation bear on the agency’s expertise?
5. Does the interpretation reflect the agency’s “fair and considered judgment”?

M&T Farms appealed. On June 4th, in a unanimous opinion by Judge Andrew Hurwitz, the Ninth Circuit affirmed. Like the magistrate judge, the Ninth Circuit panel determined that the Kisor factors militated in favor of deference.

At step one, the M&T Farms panel (and the magistrate judge) identified a “genuine ambiguity” after consulting the disputed text, surrounding text, other regulatory materials, and a dictionary. At the step-two inquiry, the court determined that the agency’s interpretation is reasonable because it is “not foreclosed by any other definition, and is justified by legitimate policy considerations.”

Of the remaining three factors, M&T Farms disputed only whether the FCIC’s interpretation reflected the agency’s “substantive expertise.” The court found that the controverted interpretation regarding program eligibility fell squarely within the agency’s subject-matter expertise: “administering crop insurance.”

M&T Farms was the Ninth Circuit’s fourteenth application of the Kisor doctrine. See Idaho Conservation League v. Poe, 86 F. 4th 1243 (2023); Backcountry Against Dumps v. FAA, 77 F. 4th 1260 (2023); Love v. Marriott Hotel Services, Inc., 40 F. 4th 1043 (2022); Miskey v. Kijakazi, 33 F. 4th 565 (2022); Mountain Communities for Fire Safety v. Elliott, 25 F. 4th 667 (2022); Etemadi v. Garland, 12 F. 4th 1013 (2021); NPCA v. FERC, 6 F. 4th 1044 (2021); Rubalcaba v. Garland, 998 F. 3d 1031 (2021); Goffney v. Becerra, 995 F. 3d 737 (2021); Innova Solutions, Inc. v. Baran, 983 F. 3d 428 (2020)*; Attias v. Crandall, 968 F. 3d 931 (2020); Secretary of Labor v. Seward Ship’s Drydock, Inc., 937 F. 3d 1301 (2019); NRDC v. Perry, 940 F. 3d 1072 (2019).

In eight of the fourteen cases, the inquiry ended at step one, as the Ninth Circuit determined the text to be unambiguous. (Miskey v. Kijakazi; Mountain Communities for Fire Safety v. Elliott; Etemadi v. Garland; Rubalcaba v. Garland; Innova Solutions, Inc. v. Baran; Attias v. Crandall; Secretary of Labor v. Seward Ship’s Drydock, Inc.; and NRDC v. Perry). Overall, these cases evince straightforward applications of the Kisor test, although there are exceptions. See, e.g., Backcountry Against Dumps v. FAA, 77 F. 4th 1260, 1274 (2023) (Bress, J., concurring in judgment) (faulting the majority for a “rather casual” application of the Kisor factors). These initial results suggest that the Supreme Court in Kisor has been largely successful in getting lower courts to cease “waiving the ambiguity flag” on regulatory interpretations, as M&T Farms suggests. See Kisor v. Wilkie, 139 S. Ct. 2400, 2416 (2019).