April 2, 2020

XXXXX

XXXXX

XXXXX

XXXXX

Re:  EAJA Case No. 2016E000186

Dear XXXXX:

This letter responds to your request for Director review of an Equal Access to Justice Act (or EAJA) Determination issued by a National Appeals Division (or NAD) Adjudicative Officer that you filed on behalf of XXXXX in the above-captioned case.[1]  In the EAJA Determination, the Adjudicative Officer denied an application submitted by XXXXX for fees and costs incurred in connection with an adverse decision issued by the Natural Resources Conservation Service (or NRCS) that was the subject of an adversary adjudication by a NAD Administrative Judge.  The Adjudicative Officer denied the application because he determined that NRCS’s position in the adversary adjudication was substantially justified.[2] You then filed this request for Director review, challenging the Adjudicative Officer’s determination.  Based on my review of the entire record, I reverse the Adjudicative Officer’s determination and remand the case for further proceedings. 

In response to a request for Director review of an EAJA Determination, I conduct a review of the Adjudicative Officer’s findings of fact and conclusions of law to determine whether they are correct.  When reviewing the Adjudicative Officer’s EAJA Determination, I have all of the powers that the Adjudicative Officer had in making the initial decision.  See 5 U.S.C. 557(b); 7 C.F.R. § 1.201(a).

In the adversary adjudication (or underlying proceedings), XXXXX challenged an adverse decision issued by NRCS.  In its adverse decision, NRCS found that 14.2 acres on XXXXX is farmed wetland.  Relying upon its scope and effect analysis, NRCS found sufficient evidence of ponding and saturation to label the site a farmed wetland.[3] XXXXX, however, contended that the acreage consisted of prior converted cropland.[4]  Following a hearing, a NAD Administrative Judge determined that NRCS erred in its decision as follows: 

The purpose of a scope and effect analysis is to determine the impact that the existing drainage system has on removal of wetland hydrology.  Because the site is located in the prairie pothole region, the relevant criteria for wetland hydrology includes both inundation and saturation.  Agency’s decision to disregard certain features of the farm’s drainage system affects the accuracy of that determination.  In particular, the results from Agency’s XXXXX equations are unreliable given Agency’s disregard of the surface drains and laterals.  Agency characterizes its decision to disregard the drains and laterals and use other assumptions in its analysis as the technical judgment of its engineer; however, I find the Agency’s decision arbitrary given that it is counter to the methodology contained in the [National Engineering Handbook] and based purely on conjecture. 

Appeal Determination at 6. 

NRCS then challenged the Administrative Judge’s decision.  On review, the NAD Director upheld the Administrative Judge’s decision, noting that NRCS did not base its analysis on data about water inflow and outflow, discarded some of the data that was provided, and supplemented the data with unsupported assumptions: 

NRCS ignored surface inlets that should have been considered and did not consider the historic records from the drainage district.  The [National Engineering Handbook] in particular, suggests various sources of information that NRCS could have used in making its determination but did not.  Most notable, the [National Engineering Handbook] states that the XXXXX equation cannot be used where surface inlets to the drain are present, but NRCS did just that, speculating that the surface inlets were rendered ineffective by inflows from unknown areas even though such assumptions had been refuted.  NRCS’s scope and effect analysis did not follow federal regulations or established procedure. 

Director Review at 7 (citations to the record omitted).  

You then filed an EAJA application on behalf of XXXXX for recovery of fees and costs incurred in connection with the underlying NAD proceedings.  The Adjudicative Officer, however, denied your application, finding that NRCS’s position in the underlying proceeding was substantially justified.  In the underlying proceeding, an NRCS engineer articulated the basis upon which the site met wetland hydrology criteria to be considered a farmed wetland, including the engineer’s explanations for the data, assumptions, and judgments that factored into the scope and effect analysis.  Even though the data was inaccurate, the Adjudicative Officer concluded that it was not unreasonable for NRCS to rely on the scope and effect analysis and opinion of its engineer in support of its position in the underlying proceeding.

On Director review, you argue that the agency’s failure to follow its own rules is not substantially justified.  You contend that strongly worded findings of the Administrative Judge and Director in the underlying adjudications, such as “contrary to the evidence,” “arbitrary,” “based purely on conjecture,” and “ unsupported assumptions” are the antithesis of a reasonable basis in fact or law.  Because NRCS did not follow the National Engineering Handbook, you argue that the agency’s position cannot be substantially justified.

In response, NRCS argues that it followed its rules and procedures and reasonably relied on its expert’s use of the XXXXX equation.  NRCS contends that the use of that equation did not violate agency policy, much less statute or regulation.  NRCS explains that there are no regulations that discuss how to analyze a site that lacks information of an offsite tile system or that discuss the proper use of the XXXXX equation.  Instead, the appropriate use of the XXXXX equation is found in the Hydrology Tools for Wetland Determination, which is part of the National Engineering Handbook and is a reference document, not a regulation.  NRCS contends that a violation of this handbook does not preclude a finding of substantial justification.  See U.S. v. Pecore, 664 F.3d 1125, 1132 (7th Cir. 2011) (stating that an agency’s internal policies and procedures, as opposed to duly enacted regulations, do not have the force of law, and that a violation of an internal policy does not prevent the government from establishing a substantially justified claim).  NRCS further contends that this dispute is more akin to a dispute between expert witnesses, which bolsters a substantial justification claim.  See Pecore, 664 F.3d at 1136; see also Temp Tech Indus., Inc. v. N.L.R.B., 756 F.2d 586, 590 (7th Cir. 1985) (a finding on a credibility issue does not preclude a position of a basis in fact). 

I have considered NRCS’s argument but do not find it persuasive.  In previous determinations, NAD has held that an agency must follow its regulations, including the requirements of its manuals.  See, e.g., NAD Case No. 2009E000753 (Dir. Rev., Feb. 2, 2010) (holding that regulations require all conservation practices to be carried out in accordance with the applicable NRCS field office technical guide).  NAD’s decisions holding agencies to the requirements of their own rules and procedures are grounded in the so-called Accardi doctrine.  See United States ex rel. Accardi v. Shaughnessy, 347 U.S. 260 (1954).[5]  NAD has held that an agency’s failure to follow its own regulations supports a finding that its position was not substantially justified for purposes of EAJA.  See EAJA Case No. 2016E000418 (Dir. Rev., Apr. 19, 2019). 

Nevertheless, NAD has recognized that not all statements contained in agency guidance documents are intended to bind the agency, and in such cases, NAD has granted equitable relief rather than find that an agency violated the law when it departed from provisions of its handbook.  See, e.g., NAD Case No. 2017S000195 (Dir. Rev., Apr. 11, 2018).  In other words, when agency guidance is not intended to create rights and procedures to protect the interests of participants and is intended to guide agency technicians, it may not always be appropriate to find that the agency is bound by the guiding provision as a matter of law.  See Lopez v. F.A.A., 318 F.3d 242, 247 (D.C. Cir. 2003) (distinguishing procedural rules benefitting the agency and procedural rules benefitting the party otherwise left unprotected); see also Padula v. Webster, 822 F.2d 97, 100 (D.C. Cir. 1987) (finding that statements, which are prospective and impose no rights or obligations on the parties, will not be treated as binding). 

Whether the rules governing the XXXXX equation are binding and whether the agency’s position is substantially justified for purposes of EAJA when the agency failed to abide by them depends on the test set forth in Pierce:  “a position can be substantially justified even though it is not correct, and we believe that it can be substantially (i.e., for the most part) justified if a reasonable person could think it correct, that is, if it has a reasonable basis in law and fact.”  Pierce v. Underwood, 487 U.S. 552, 566, n.2 (1988). 

When NAD determines whether the agency’s position was substantially justified, it is limited to reviewing the administrative record that was made in the adversary adjudication for which the fees and costs are sought.  See 5 U.S.C. § 504(a)(1).  According to the record, XXXXX provided NRCS with extensive information about the farm’s drainage tile system, which included the tile map, tile size and depth, location and size of surface inlets, field measured topography, photographs of the drain tile system, and documentation of mains and outlets for the drainage district in which the farm is located.  NRCS, however, chose not to consider this evidence when completing the XXXXX equation, based on unsupported assumptions that drainage from unknown offsite locations could potentially render the drains and laterals ineffective.  NRCS’s decision to disregard evidence affected the accuracy of its calculation, and the results of its XXXXX equation were unreliable, counter to the methodology contained in the National Engineers Handbook and based on conjecture.[6]

Those findings became final on Director Review.  Because NAD determined that NRCS’s scope and effect analysis did not follow federal regulations or established procedures, NRCS cannot now argue that it did so in this EAJA proceeding.  See EAJA Case No. 2011S000462 (Dir. Rev., June 6, 2013) (holding that an EAJA proceeding is not an opportunity for a party to present evidence or argument about whether the adversary adjudication was correct).  Based on my review of the record, I find that NRCS’s position was not substantially justified because it does not have a reasonable basis in law and fact.[7] See Pierce, 487 U.S. at 563-566.  Accordingly, I reverse the Adjudicative Officer. 

Having determined that NRCS’s position in the underlying adjudication was not substantially justified, it is now proper to consider whether an award of fees and expenses under EAJA should be allowed.  Because the Adjudicative Officer determined that NRCS’s position in the underlying proceedings was substantially justified, she did not address whether your claimed fees are authorized under EAJA.  I therefore find that the record is incomplete, and I remand this case for further proceedings.  On remand, I direct the Adjudicative Officer to review all the evidence in the record to determine whether an award of fees and expenses under EAJA should be allowed and, if so, the appropriate amount of such fees and costs.

Sincerely,

/s/

Frank M. Wood

Director

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[1] Initial determinations on applications to NAD for an award of attorney fees and other expenses under EAJA are made by a NAD Administrative Judge.  When making EAJA determinations, NAD Administrative Judges are referred to as Adjudicative Officers.  See 7 C.F.R. § 1.180(b).  The Secretary of Agriculture has delegated to me, as the Director of the National Appeals Division, the authority to take final action on EAJA applications arising out of proceedings conducted under 7 C.F.R. Part 11.  See
7 C.F.R. § 1.189(b)(1).  When I conduct a review of an Adjudicative Officer’s determination, I do so under the provisions of 7 C.F.R. §§ 1.145(b)-(i) and 1.146(b).

[2] I incorporate by reference the EAJA Determination (Adj. Off., Aug. 8, 2017) issued in this case.

[3] A scope and effect analysis describes the physical extent or dimensions of the drainage system (or scope) and the surface or subsurface drainage impact or influence (or effect) of the system.  Scope and effect equations determine the effect of drainage systems on water table drawdown and whether they remove wetland hydrology from a site.  The Kirkham and the Van Schilfgaarde equations are two equations that NRCS uses to conduct a scope and effect analysis.  See Part 650 Engineering Field Handbook, Chapter 19 Hydrology Tools for Wetland Identification and Analysis, Section 1909, Drainage Equations for Lateral Effect Determination.  

[4] A farmed wetland may be maintained and used to produce an agricultural commodity without a loss of eligibility of USDA program benefits, but any additional hydrologic manipulation after December 23, 1985, may result in non-compliance with wetland conservation provisions and loss of eligibility for USDA program benefits.  See National Food Security Act Manual (or NFSAM), Sec. 514.31.  Prior converted cropland, on the other hand, is a converted wetland that fails to meet the hydrologic criteria of a farmed wetland, and hydrologic manipulation on prior converted cropland may be maintained or improved without loss of eligibility for USDA program benefits.  See NFSAM Sec. 514.30.  The distinction between the two is based on the frequency and duration of ponding or saturation for the requisite length of time. 

[5] NAD has recognized the Accardi doctrine in several prior Director Review Determinations.  See, e.g., NAD Case No. 2013W000459 (Dir. Rev., Mar. 4, 2015) (finding that the Risk Management Agency is bound by its own rules to use the price guide specified by the rules).

[6] Kirkham’s equation is meant to be applied where the tile line lies directly under the wetland, but the site has no surface intake and water ponds.  See Part 650 Engineering Field Handbook, Chapter 19 Hydrology Tools for Wetland Identification and Analysis, Section 1905(f)(2).

[7] Because I have determined that NRCS’s position does not have a reasonable basis in law and fact, I do not address NRCS’s additional arguments.