i ORAL ARGUMENT SCHEDULED FOR MAY 9, 2008 IN THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT ____________________ No. 07-5173 (consolidated with No. 07-5199 (cross-appeal)) ____________________ CREEKSTONE FARMS PREMIUM BEEF, L.L.C., Plaintiff-Appellee/Cross-Appellant, v. UNITED STATES DEPARTMENT OF AGRICULTURE and EDWARD SCHAFER, SECRETARY OF AGRICULTURE, Defendant-Appellant/Cross-Appellee. ____________________ ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________ REPLY BRIEF OF APPELLEE/CROSS-APPELLANT CREEKSTONE FARMS PREMIUM BEEF, L.L.C. ____________________ Russell S. Frye FryeLaw PLLC 1101 30th Street, N.W., Suite 220 Washington, DC 20007-5108 (202) 572-8267 Counsel for Creekstone Farms Premium Beef, L.L.C. Dated: April 7, 2008 [additional counsel on inside cover] ii [counsel for Creekstone Farms Premium Beef, L.L.C., continued:] William L. Miller The William Miller Group, PLLC 1666 Connecticut Avenue, N.W., Suite 222 Washington, DC 20009 (202) 256-2306 Peter C. Choharis Choharis Global Solutions 1101 17th Street, N.W., Suite 1220 Washington, DC 20008 (202) 293-5340 i TABLE OF CONTENTS TABLE OF AUTHORITIES............................................................................. ii GLOSSARY .................................................................................................... iv INTRODUCTORY STATEMENT ................................................................... 1 SUMMARY OF ARGUMENT......................................................................... 4 ARGUMENT.................................................................................................... 5 I. USDA Has Failed To Show That Its Actions Preventing Creekstone from Testing Its Cattle for BSE Are Authorized by the VSTA. ............... 5 A. There Is No Support for USDA's Position in the Statutory Language. ........................................................................................ 6 B. Section 154 Does Not Authorize USDA To Regulate for Purposes Beyond Those Set Forth in the VSTA............................. 11 C. The Legislative History Does Not Support USDA's Assertion of Expansive Regulatory Authority Under the VSTA. ....................... 15 II. Contrary to USDA's Claim in this Litigation, It Is Not Preventing Creekstone from Conducting Private BSE Testing Because of Animal Health Concerns.................................................................................... 22 III. USDA Has Not Justified its Claim to Deference for its Overbroad Interpretation of its Regulatory Authority Under the VSTA. ................. 25 CONCLUSION.............................................................................................. 29 CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMITATIONS, TYPEFACE REQUIREMENTS, AND TYPE STYLE REQUIREMENTS CERTIFICATE OF SERVICE ii TABLE OF AUTHORITIES1 FEDERAL CASES *Aid ash'n for Lutherans v. USPS, 321 F.3d 1166 (D.C. Cir. 2003)..7, 25, 27, 28 *Bowen v. Georgetown Univ. Hospital, 488 U.S. 204 (1988) ..............13, 15, 27 Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) ....................................................................................... 10 Chrysler Corp. v. Brown, 441 U.S. 281, 306 (1979) ......................................... 9 Creekstone Farms Premium Beef, L.L.C. v. United States Dept. of Agriculture, et al., 517 F. Supp.2d 8 (2007) ...........................14, 17, 19, 24 Engine Mfrs. ash'n v. EPA, 88 F.3d 1075 (D.C. Cir. 1996) ............................... 5 *ExxonMobil Gas Marketing Co. v. FERC, 297 F.3d 1071 (D.C. Cir. 2002), rehearing en banc denied 2002 U.S. App. LEXIS 22102-104, cert. denied 540 U.S. 937 .......................................................................... 8 Friends of the Earth v. EPA, 446 F.3d 140 (D.C. Cir. 2006) ............................. 5 Gardebring v. Jenkins, 485 U.S. 430 (1988) .................................................. 15 *Garrelts v. Smithkline Beecham Corp., 943 F. Supp. 1023 (N. D. Ia. 1996) ............................................................................................15, 16, 17 Lynbrook Farms v. Smithkline Beecham Corp., 79 F.3d 620 (7th Cir. 1996) ...................................................................................................... 10 *Nat'l Mining ash'n v. Kempthorne, 512 F.3d 702 (D.C. Cir. 2008) ...12, 26, 27 *New York v. EPA, 443 F.3d 880, 889 (D.C. Cir. 2006), cert. denied 127 S. Ct. 2127 (2007) ................................................................................... 27 PanAmSat Corp. v. F.C.C., 198 F.3d 890 (D.C. Cir. 1999) ............................ 27 Planned Parenthood Fed'n, Inc. v. Heckler, 712 F.2d 650 (D.C.Cir.1983)................................................................................... 25, 26 *Railway Labor Executives' ash'n v. National Mediation Bd., 29 F.3d 655 (1994) (en banc), cert. denied, 514 U.S. 1032 (1995) ................. 19, 25 *Whitman v. American Trucking Associations, Inc., 531 U.S. 457 (2001) ...... 11 STATE CASES *Hall v. Nebraska, 100 Neb. 84, 158 N.W. 362 (1916) ............................. 16, 17 FEDERAL STATUTES 1 Authorities upon which we chiefly rely are marked with asterisks. iii 5 U.S.C. § 706(2)(C) ......................................................................................... 5 7 U.S.C. §§ 136i-136l........................................................................................ 7 7 U.S.C. §§ 136a-136k ...................................................................................... 7 7 U.S.C. § 8401(g)(1)(C) ................................................................................ 21 21 U.S.C. §§ 151-157........................................................................................ 8 21 U.S.C. § 154............................................................................................... 13 21 U.S.C. §§ 157-159................................................................................ 11, 12 42 U.S.C. § 262a(a)(1) .................................................................................... 21 Agricultural Bioterrorism Protection Act of 2002, 7 U.S.C. § 8401................. 21 Virus-Serum-Toxin Act, 21 U.S.C. §§ 151-59 ("VSTA") ...........4, 5, 6, 7, 9, 10, 11,12, 13, 15, 16, 17, 18, 20, 21, 22, 23, 24, 25, 27, 28, 29 1985 VSTA Amendments, P.L. 99-198, 99 Stat. 1654-56 ......................... 13, 14 FEDERAL REGULATIONS 9 C.F.R. § 102.5(d).........................................................................13, 14, 27, 29 9 C.F.R. § 104.1........................................................................................ 13, 29 FEDERAL REGISTER NOTICES 13 Fed. Reg. 9296, 9298 (December 31, 1948) ............................................... 28 39 Fed. Reg. 37,762, 37,764 (October 24, 1974) ............................................. 29 62 Fed. Reg. 31,326, 31,327 (June 9, 1997) .................................................... 17 70 Fed. Reg. 460, 475-76 (Jan. 4, 2005).......................................................... 20 70 Fed. Reg. 73,905, 73,914 (Dec. 14, 2005) .................................................. 20 iv GLOSSARY APHIS Animal and Plant Health Inspection Service [of USDA] BSE Bovine spongiform encephalopathy Creekstone Br. Brief of Appellee/Cross-Appellant Creekstone Farms Premium Beef, L.L.C. EU European Union USDA United States Department of Agriculture USDA Br. Reply Brief for the Appellants and Brief for the Cross- Appellees VSTA Virus-Serum-Toxin Act ORAL ARGUMENT SCHEDULED FOR MAY 9, 2008 INTRODUCTORY STATEMENT In the two years since Creekstone Farms Premium Beef filed suit to secure the ability to test its own cattle for bovine spongiform encephalopathy ("BSE"), new developments have only increased the need for such testing and decreased support for USDA's continued attempt to block Creekstone from conducting its voluntary testing program. South Korea and Japan, markets where Creekstone previously sold much of its beef, remain closed to U.S. beef or severely restricted.2 Just as importantly, in the eyes of consumers in those countries U.S.-origin beef is considered unsafe because of BSE fears.3 2 See http://www.fsis.usda.gov/regulations_&_policies/Republic_of_Korea_Requirem ents/index.asp (all imports from U.S. suspended) and http://www.fsis.usda.gov/regulations_&_policies/Japan_Requirements/index.asp (only beef from cattle 20 months of age and younger, etc.) (last visited April 4, 2008). 3 See, e.g., "86% of Housewives Question Safety of U.S. Beef," Korea Times, January 23, 2008, available at http://www.koreatimes.co.kr/www/news/biz/2008/01/123_17801.html (last visited April 4, 2008); "After the Ban: The Japanese Market for U.S. Beef," Midwest Agribusiness Trade Research and Information Center, Iowa State University, at 13, available at http://www.card.iastate.edu/publications/DBS/PDFFiles/07mbp12.pdf (last visited April 4, 2008) ("Because of universal testing, most Japanese consumers believe that domestic beef is safer than beef imported from a country where BSE has been found but that does not test all cattle."). 2 USDA continues to ban voluntary BSE testing, ostensibly because it is not targeted at cattle most likely to test positive for BSE, such as nonambulatory or "downer" cattle (which are not allowed to be slaughtered for human consumption anyway).4 Yet consumer confidence that U.S. beef does not contain meat from such non-ambulatory cattle was decimated by USDA's announcement in February of the largest recall of beef in U.S. history, from a meat packing plant that repeatedly slaughtered such non-ambulatory cattle.5 (On-site USDA inspectors were either unaware of this practice or ignored it.) Secretary Schafer has acknowledged that this violation of USDA regulations implicates BSE concerns and that "[t]o other nations, this event raises a concern about the safety of our food processing system and the fact that we can provide a reason for them to keep our markets closed for U.S. products in the trade agreements."6 4 Reply Brief for the Appellants and Brief for the Cross-Appellees ("USDA Br.") at 11-12. 5 See USDA press briefing available at http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB/.cmd/ad/.ar/sa.retriev econtent/.c/6_2_1UH/.ce/7_2_5JM/.p/5_2_4TQ/.d/2/_th/J_2_9D/_s.7_0_A/7_0_ 1OB?PC_7_2_5JM_contentid=2008%2F02%2F0047.xml&PC_7_2_5JM_paren tnav=TRANSCRIPTS_SPEECHES&PC_7_2_5JM_navid=TRANSCRIPT#7_2 _5JM (last visited April 7, 2008). 6 Transcript of press briefing available at http://www.usda.gov/wps/portal/!ut/p/_s.7_0_A/7_0_1OB/.cmd/ad/.ar/sa.retriev econtent/.c/6_2_1UH/.ce/7_2_5JM/.p/5_2_4TQ/.d/1/_th/J_2_9D/_s.7_0_A/7_0_ 3 Ignoring this striking evidence that BSE safeguards are not being fully implemented, USDA assures the Court that Creekstone's voluntary BSE testing would be of no value and that USDA's own use of BSE rapid test kits "allow USDA to respond to any potential occurrences of BSE." USDA Br. at 5. But that is true only if these kits are used, and USDA has slashed its BSE surveillance using the kits by 90 percent in the last two years. See App. 261. Now, rather than welcome Creekstone's plan to expand BSE testing, USDA is trying to block it in order to "prevent[] beef producers from having to incur increased costs of conducting the BSE testing . . . to remain competitive if private BSE testing were permitted." See Brief of Appellee/Cross-Appellant Creekstone Farms Premium Beef, L.L.C. ("Creekstone Br.") at 65. That is what this case is about: whether USDA can interpret an eightythree year old statute, designed to protect hog farmers from bogus vaccines, to allow it to keep consumers from the information they seek and to protect large beef producers against free market competition from smaller producers like Creekstone that want to sell beef from BSE-tested cattle to their customers. No amount of creative statutory interpretation permits such agency abuse. 1OB?PC_7_2_5JM_contentid=2008%2F02%2F0057.xml&PC_7_2_5JM_paren tnav=TRANSCRIPTS_SPEECHES&PC_7_2_5JM_navid=TRANSCRIPT#7_2 _5JM (last visited April 7, 2008). 4 SUMMARY OF ARGUMENT USDA's brief fails to respond adequately or, in a number of instances, at all to the showing in Creekstone's brief that neither the language of the Virus- Serum-Toxin Act, 21 U.S.C. §§ 151-59, ("VSTA") nor its legislative history supports USDA's broad claim of authority to control who may obtain and use biological products, and for what purpose. The best USDA can come up with is that the statute does not expressly prohibit USDA's action, but agencies cannot expand their authority on that basis. And faced with the total absence of any statutory language or legislative history that would suggest USDA can restrict a biological product because of USDA's supposed concerns about "the public interest," rather than on the effect of that biological product on the treatment of disease in cattle, USDA offers a confused and unconvincing claim that its action somehow really is related to animal health. On virtually every point Creekstone made in its cross-appeal, USDA cannot refute the case law and statutory analysis Creekstone presented. Nonetheless, USDA asks the Court to defer to USDA's interpretation of its statutory authority, without ever disproving Creekstone's arguments and legal authority that demonstrated that deference is not due under these circumstances. 5 USDA can only prevail if the Court concludes that the VSTA (by implication only) gives USDA authority to prevent the shipment of biological products where those products are not being used for the protection of animal health, and where USDA's purpose for preventing such shipment does not relate to the suitability of those products to protect animal health. This Court should not permit USDA to thwart Creekstone's legitimate business interest in meeting its customers' demand for beef from BSE-tested cattle without a strong showing that such interference falls within the language and intent of the statute on which USDA relies. USDA has failed completely to make such a showing. ARGUMENT I. USDA Has Failed To Show That Its Actions Preventing Creekstone from Testing Its Cattle for BSE Are Authorized by the VSTA. When an agency imposes restrictions on a person that are outside of the agency's legal authority, those restrictions must be struck down under the Administrative Procedure Act, 5 U.S.C. § 706(2)(C). See Engine Mfrs. ash'n v. EPA, 88 F.3d 1075, 1089 (D.C. Cir. 1996); Friends of the Earth v. EPA, 446 F.3d 140 (D.C. Cir. 2006). USDA claims that it has authority under the VSTA to prevent Creekstone from obtaining and using BSE test kits on cattle that Creekstone has slaughtered, to meet its customers' demand for BSE-tested beef. USDA claims that the VSTA authorizes it to restrict who may use a biological 6 product and for what purpose. Beyond that, USDA claims it can do so for reasons wholly apart from animal health. (Animal health is not at issue in Creekstone's case, since the cattle being tested will already be dead and Creekstone will not use the test data for the management of any animal disease.) USDA asserts that it "is empowered to make such 'rules and regulations as may be necessary' to prevent the distribution of worthless or harmful biological products, whether in the service of animal health or human benefit." USDA Br. at 4. It claims that: "The statute's text and legislative history clearly contemplate that USDA may act based on [economic concerns or human health or safety] as well as those of animal health." Id. at 21. Yet it offers virtually no support for these assertions, at least none that is relevant to its actions denying Creekstone the right to test its cattle for BSE. A. There Is No Support for USDA's Position in the Statutory Language. With respect to the statute's text, it is indisputable that there is no mention in the statute of regulating the possession and use of biological products, let alone authorizing such regulation "in the service of…human benefit." USDA Br. at 4. To the contrary, the plain language of the VSTA makes clear that USDA is only authorized to regulate for the purpose of protecting against the 7 preparation and sale of biological products that are intended for use in the treatment of domestic animals and that are ineffective or dangerous. In contrast to USDA's broad assertion of authority, the VSTA contains no language making it a crime to possess biological products or use them in a way contrary to what the USDA license or import permit specifies. The VSTA does not contain language permitting USDA to regulate claims that can be made about domestic animals (or meat from domestic animals) on which a biological product has been used. Nor does the VSTA contain language allowing USDA to inspect facilities that use biological products. See 21 U.S.C. §§ 151-159; compare, e.g., 7 U.S.C. §§ 136i-136l (authorizing such regulation of those who possess and use pesticides, in addition to the regulation of pesticide producers and their facilities provided under, inter alia, 7 U.S.C. §§ 136a-136k). In the absence of any express statutory authority to regulate, USDA flips the law on its head, claiming it can ban Creekstone from obtaining and using BSE test kits, for reasons other than animal health, because the statute does not expressly prohibit regulation for purposes unrelated to animal health. USDA Br. at 20 ("the language of the statute contains no such restriction"); id. at 4 (same). But that is precisely the kind of claimed justification that this Court has rejected "as entirely untenable under well-established case law." Aid ash'n for Lutherans v. USPS, 321 F.3d 1166, 1174 (D.C. Cir. 2003). USDA has no 8 response to Creekstone's citation of well-established case law in this circuit and elsewhere that limits an agency's authority to only those powers specifically granted by Congress. See Creekstone Br. at 25-26, 42-44, 49-50; see also ExxonMobil Gas Marketing Co. v. FERC, 297 F.3d 1071, 1088 (D.C. Cir. 2002), rehearing en banc denied 2002 U.S. App. LEXIS 22102-104, cert. denied 540 U.S. 937. USDA's position is that a statute whose sole stated purpose is to prevent the preparation, sale, barter, exchange, or shipment of "any worthless, contaminated, dangerous, or harmful virus, serum, toxin, or analogous product for use in the treatment of domestic animals"7 also gives USDA authority to control who may possess such products, the manner in which they may be used, and the purposes for which they may be used. Indeed, USDA claims this authority even though (1) Creekstone's intended use is not for the treatment of domestic animals and (2) USDA's reason for imposing the restrictions is not to protect domestic animals from worthless, contaminated, dangerous, or harmful biological products. There simply is no basis for such an assertion of virtually unlimited authority to take whatever action with respect to biological products that USDA 7 Cf. 21 U.S.C. §§ 151-157. 9 believes it is "in the service of…human health or human benefit." The U.S. Supreme Court dismissed similar reasoning when it rejected the Labor Department's claim that regulations authorizing disclosure of certain confidential business information were authorized by laws granting it authority to collect such information. The Court held that "it is clear that when it enacted these statutes, Congress was not concerned with public disclosure of trade secrets or confidential business information, and, unless we were to hold that any federal statute that implies some authority to collect information must grant legislative authority to disclose that information to the public, it is simply not possible to find in these statutes a delegation of the disclosure authority asserted by the respondents here." Chrysler Corp. v. Brown, 441 U.S. 281, 306 (1979). The VSTA never mentions anything even remotely resembling regulation of biological products for reasons unrelated to protecting animal health, such as protecting human health, providing accurate information to consumers, maintaining domestic and international confidence in the quality of U.S. agricultural products, or protecting some meat processors from competition from products produced by companies that use biological products. See Creekstone Br. at 19-21. And it certainly never states that USDA is authorized to restrict the distribution of biological products whenever USDA believes it is in the public interest to do so. 10 In fact, USDA's argument that the "statute's text…clearly contemplate that USDA may act based on" its view of the public interest "as well as" on concerns "of animal health," USDA Br. at 21, is a tantamount concession that the VSTA contains no express language authorizing it to regulate biological products for purposes unrelated to animal health. USDA Br. at 4, 21 (italics added). USDA does not even attempt to overcome the numerous decisions of the U.S. Supreme Court and this Court rejecting similar assertions of agency authority based on silence rather than a specific statutory delegation of authority.8 Nor does USDA offer any response to Creekstone's argument that, using "traditional tools of statutory construction" as directed by Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842-43 & n.9 (1984), the VSTA should be considered unambiguous, and therefore no deference 8 See Creekstone Br. at 25-26, 42-43. USDA does cite Lynbrook Farms v. Smithkline Beecham Corp., 79 F.3d 620, 624-26 (7th Cir. 1996), claiming that decision held that USDA can regulate biological products "based upon a need to protect domestic animals or the public health, interests, or safety." See USDA Br. at 20. In fact, that opinion says nothing of the sort. It merely quotes a USDA Federal Register statement in which USDA's Animal and Plant Health Inspection Service stated that it "does not agree that States should be allowed to add various restrictions [on the use of biological products]… based upon a need to protect domestic animals or the public health, interests or safety." 79 F.3d at 625 (emphasis added). In fact, that opinion emphasizes that USDA's "congressional mandate is to ensure safe and effective vaccines," id., and describes the "areas under its regulatory control (namely the safety, purity, potency, and efficacy of vaccines)," id. at 630. The decision decidedly does not stand for the proposition that the VSTA authorizes USDA to prohibit access to biological products for vague, so-called public interest purposes. 11 should be accorded to USDA's interpretation of it, because the statute lists certain actions that USDA may prevent but does not list "possession" or "use" of biological products nor regulation unrelated to the treatment of domestic animals. See Creekstone Br. at 44-45, 58; see also Whitman v. American Trucking Associations, Inc., 531 U.S. 457, 467-69 (2001) (rejecting claim that important regulatory authority was provided "in vague terms or ancillary provisions"). B. Section 154 Does Not Authorize USDA To Regulate for Purposes Beyond Those Set Forth in the VSTA. In the absence of any statutory text explicitly authorizing the extraordinarily broad authority USDA now claims, USDA asserts that such authority can be found in the language of 21 U.S.C. § 154, which authorizes USDA to issue regulations "as may be necessary to prevent the preparation, sale, barter, exchange, or shipment…of any worthless, contaminated, dangerous, or harmful virus, serum, toxin, or analogous product for use in the treatment of domestic animals, or otherwise to carry out this chapter…." USDA makes no attempt to explain, however, why this single provision of the VSTA, authorizing regulations "as may be necessary...otherwise to carry out" the VSTA, could have been intended to authorize USDA to regulate a whole class of persons and activities not addressed anywhere else in the VSTA. 12 Nor has USDA responded at all to the cases cited by Creekstone that state, logically, that a statutory provision authorizing an agency to issue regulations to implement the statute necessarily is limited to regulations that are consistent with the congressional purposes for the statute and reasonably related to the specific regulatory authorities contained elsewhere in the statute. See Creekstone Br. at 49-50, 52; see also Nat'l Mining ash'n v. Kempthorne, 512 F.3d 702, 709-710 (D.C. Cir. 2008) (where statute authorized agency to "publish and promulgate such rules and regulations as may be necessary to carry out the purposes and provisions of" the statute, the Court looked to whether regulations were "consistent with the underlying statutory scheme in a substantive sense" and reflect the stated purposes and "primary aim" of the statute (internal quotations and citation omitted)). USDA's brief is schizophrenic on this issue. On the one hand, USDA repeatedly asserts that the statutory authority for its preventing Creekstone from obtaining and using BSE test kits, for reasons unrelated to animal health, is the provision of the VSTA that authorizes USDA to issue regulations "as may be necessary...to otherwise carry out this chapter," 21 U.S.C. § 154. See, e.g., USDA Br. at 16 (claiming deference for USDA regulation allowing restrictions on how biological products may be used, "issued pursuant to USDA's broad 13 authority to promulgate 'such rules and regulations as may be necessary'" in 21 U.S.C. § 154); id. at 4, 20. On the other hand, USDA concedes that it issued the regulation on which it relies to prevent Creekstone from BSE testing, 9 C.F.R. § 102.5(d), before Congress passed Section 154 in the 1985 Amendments.9 Accordingly, Section 154 could not possibly have provided the legal basis for USDA to issue 9 C.F.R. § 102.5(d). See Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 212 (1988) (agency action can only be upheld on the basis articulated by the agency at the time, not on post hoc rationalizations by its counsel in litigation). Undaunted, USDA argues that 1985 amendments to the VSTA, which added section 154, retroactively endorsed an expansive view of USDA's authority under the VSTA upon which USDA purportedly based its earlier promulgation of 9 C.F.R. § 102.5(d). USDA Br. at 17-18. But Congress could not have endorsed an interpretation that was never brought to its attention and which USDA only recently has claimed is so expansive as to authorize it to prohibit voluntary testing for reasons unrelated to animal health. See Creekstone 9 See USDA Br. at 17. USDA also cited 9 C.F.R. § 104.1, which simply requires a permit to import of biological products. See App. 83. But USDA claims this citation to section 104.1 incorporates its authority to regulate the use of products for the protection of the public interest in section 102.5(d)— although that is not apparent from section 104.1. Cf. USDA Br. at 19. 14 Br. at 48 n.13 (citing cases requiring some indication that Congress was aware of an agency's interpretation and intended to ratify it in subsequent legislation); see also, e.g., declaration of BSE and pubic health expert Paul W. Brown, M.D. ¶ 8 (App. 261) ("I am not aware of any other programs under which USDA has prohibited testing for a disease . . . ."). In fact, the District Court found "no indication that Congress intended to ratify the agency's interpretation." Creekstone Farms Premium Beef, L.L.C. v. United States Dept. of Agriculture, et al., 517 F. Supp.2d 8, 14 (2007) (App. 474). Moreover, USDA contradicts itself when it claims that the 1985 Amendments both "expanded the statute's grant of rulemaking authority to encompass such regulations 'as may be necessary…to otherwise carry out this chapter,'" and at the same time ratified USDA's already expansive view of its rulemaking authority. USDA Br. at 17. Finally, USDA does not respond to Creekstone's observation that, at the time USDA promulgated 9 C.F.R. § 102.5(d), it took the opposite position from the one it takes in this case. Responding to commenters' concerns about the vagueness of Section 102.5(d)'s reference to the "public interest," USDA stated that it was merely referring to the "benefits" the public receives "as a result of the successful protection of animals from various diseases, including those which are of great public concern such as rabies." See Creekstone Br. at 67-68. This explanation clearly indicates that USDA did not believe section 102.5(d) 15 granted it authority to restrict the use of biological products based on "the public interest" if the restriction had nothing to do with "successful protection of animals from various diseases." Id. The diametrically opposed interpretation that USDA now offers as its litigating position in this case is not entitled to any weight. See, e.g., Bowen, 488 U.S. at 212-13 (an agency's interpretation of its regulation that is merely offered as a litigation position is not entitled to any deference); Gardebring v. Jenkins, 485 U.S. 430 (1988) (court will not defer to agency interpretation of its regulations offered in litigation where contradicted by "the regulation's plain language or by other indications of the Secretary's intent at the time of the regulation's promulgation"). C. The Legislative History Does Not Support USDA's Assertion of Expansive Regulatory Authority Under the VSTA. There is no indication that Congress ever contemplated anything close to the type of unbounded authority USDA claims: to ban access to biological products for any reason USDA believes to be in the public interest. The legislative history of the VSTA, as analyzed in great detail by the Garrelts court, contains no suggestion that Congress intended the VSTA to address anything other than protecting the health of domestic animals (and, therefore, the economic interests of livestock owners), and USDA offers nothing to the contrary. Compare Creekstone Br. at 51, 58-59, 66 with USDA Br. at 21; see 16 also Garrelts v. SmithKline Beecham Corp., 943 F. Supp. 1023, 1062-63, 1066- 68 (N.D. Iowa 1996) (concluding that legislative history suggests that statute addressed "a narrow concern for animal safety" and the "economic value" of livestock, threatened by worthless or dangerous vaccines, id. at 1062-62, and gives no indication "that Congress ever contemplated or committed to the agency federal regulation of human health concerns posed by animal vaccines," id. at 1067). In fact, this detailed analysis of the legislative history led the Garrelts court to reject the very assertion USDA makes to this Court, namely, that USDA has the authority to conclude that a biological product can be effective in protecting animal health but still "worthless" for other reasons. Id. USDA's response to Garrelts—simply to note that the legislative history analysis in that case was in the context of considering federal preemption of state tort claims—does nothing to undercut that analysis' direct refutation of USDA's claim that its authority to prohibit private BSE testing is consistent with the VSTA's legislative history.10 Nor does USDA's unsupported claim that a "primary aim" of the VSTA was "to control the use of dangerous and worthless 10 See USDA Br. at 21. Cf. also Hall v. Nebraska, 100 Neb. 84, 88-89, 158 N.W. 362, 363-64 (1916) (VSTA does not regulate distribution of biological product after it leaves its producer or importer). 17 products"11 overcome the contrary conclusion from courts that have looked at the VSTA's legislative history and indeed USDA's own prior descriptions of the primary purpose of the statute. See Garrelts, 943 F. Supp. at 1062-63, 1066-68; Hall v. Nebraska, 100 Neb. at 88-89, 158 N.W. at 363-64; 62 Fed. Reg. 31,326, 31,327 (June 9, 1997) ("The main purpose of VSTA is to protect those who use veterinary biologics from products which are worthless, contaminated, dangerous, or harmful"). USDA also totally muddles the distinction between congressional intent to protect the economic interests of livestock owners from bogus or harmful vaccines, and USDA's professed purposes here of protecting meat consumers from misleading information and meat packers from competition. See Creekstone Br. at 64-65. USDA emphasizes that Garrelts recognized the VSTA's "intent to protect the health of domestic animals, and their economic value." USDA Br. at 21, citing 943 F. Supp. at 1062. But the VSTA's intent to protect livestock owners from adverse economic effects of using ineffective or 11 USDA Br. at 14 (quotation marks omitted). USDA follows this statement with a citation to the District Court opinion (App. 474 [517 F. Supp.2d at 14]), but that opinion does not contain language like USDA's "primary aim" claim. USDA also fails to respond at all to Creekstone's demonstration that the single line in the Senate Report to which USDA refers is neither dispositive nor, read in context, supportive of the types of authority over who can use biological products and for what purpose that USDA asserts. See Creekstone Br. at 59 n.15. 18 harmful vaccines is not at all the same as an intent to protect large meat packers from competition with smaller producers like Creekstone that wish to test voluntarily for BSE. Nor is it anything like a congressional intent to protect beef consumers from paying higher prices for meat that has been tested for BSE, if they so desire. Clearly USDA is not acting for purposes of protecting the economic interests of the livestock owner, Creekstone, from bogus biological products: Creekstone is very aware of the limitations of BSE test kits and is nevertheless willing to spend millions of dollars administering those tests to its cattle. Creekstone Br. at 16-17; Stewart Decl. ¶¶ 6-8 (App. 36-37). USDA points to nothing—no legislative history, no judicial analysis, no USDA Federal Register discussion—that gives any indication that Congress intended the VSTA to authorize USDA to regulate biological products for purposes beyond protecting livestock and livestock owners from the injury they would suffer from the purchase and use of ineffective or harmful biological products. As Creekstone demonstrated in its opening brief—un-rebutted by USDA—countless cases hold that an agency may not transform authority to regulate for one purpose and expand it to regulate for other purposes not contemplated in the statutory language or legislative history, simply because the agency believes that such regulation would be good public policy. See Creekstone Br. at 26, 67; see also, 19 e.g., Railway Labor Executives' ash'n v. Nat'l Mediation Bd., 29 F.3d 655, 670- 71 (D.C. Cir. 1994) (en banc), cert. denied 514 U.S. 1032 (1995) (rejecting suggestion that agency's authority to act under some circumstances gave it plenary authority to act within that area). USDA does argue at length at pp. 9-12 of its response brief that preventing voluntary BSE testing is good public policy. But USDA's judgment about whether BSE test kits would be worthless as used by Creekstone was, by agreement, not the subject of the cross-motions for summary judgment (which addressed Counts I and II of the Complaint) and was explicitly reserved by the District Court.12 This Court should reject USDA's invitation to rule on Creekstone's third, arbitrary and capricious, claim that has not been fully briefed at the District Court level or before this Court. This is especially true because the description of the relevant facts in USDA's response brief is highly misleading. 12 See Creekstone, 517 F. Supp.2d at 12 n.5, 16 (App. 471, 480); see also Complaint ¶¶ 3, 44-46 (App. 9, 25-27) (describing why, even if USDA has statutory authority to regulate the use of diagnostic tests for reasons other than protection of animal health, it was arbitrary and capricious for USDA to conclude that Creekstone's proposed use could be banned because the tests would be "worthless, contaminated, dangerous, or harmful" as the statute requires). 20 For example, USDA incorrectly implies that it has, through formal noticeand- comment rulemaking, concluded that "BSE test kits are worthless in establishing the safety of healthy slaughter-age cattle for consumption." USDA Br. at 10-11. In fact, the Federal Register preamble discussions USDA cites concern USDA's response to comments made in connection with proposals to allow imports of cattle and beef from Canada and beef from Japan (countries known to have BSE), in which commenters urged USDA to require BSE testing of all Canadian and Japanese cattle destined for human consumption in the U.S. See 70 Fed. Reg. 460, 475-76 (Jan. 4, 2005); 70 Fed. Reg. 73,905, 73,914 (Dec. 14, 2005). USDA never proposed, in those rulemakings or in any rulemaking, to prohibit voluntary BSE testing of domestic U.S. cattle, nor did USDA ever conclude in a rulemaking that such testing would be "worthless" under the VSTA. See id. USDA's discussion at pp. 9-12 of its response brief also, inter alia, ignores entirely the question of how BSE testing of healthy-appearing slaughter-age cattle could be "worthless" when USDA itself says the tests can detect BSE months before there are any outward signs, and empirical experience in countries that when European countries began universal testing upon slaughter of healthy-appearing cattle above a certain age they identified significantly more cases of BSE. See Creekstone Br. at 11-15, 39-40. 21 Finally, USDA's attempt to explain why its expansive interpretation of its authority under the VSTA is not contradicted by the legislative history of the related Agricultural Bioterrorism Protection Act of 2002, 7 U.S.C. § 8401, (the "Bioterrorism Act") is confused and misses the mark. See USDA Br. at 18. Nothing USDA says contradicts Creekstone's observation that the Conference Report for that legislation shows Congress was acting on its understanding that the VSTA applies only to "biologics manufacturers" and that USDA "lack authority" under the VSTA "to regulate possession of biological agents and toxins." House Conf. Rep. No. 107-481 (May 21, 2002) at 124, reprinted in 2002 U.S.C.C.A.N. 481; see Creekstone Br. at 60-61.13 13 If USDA's assertion that "Congress…specifically exempt[ed] from the 2002 statute products regulated under the VSTA. 7 U.S.C. § 8401(g)(1)(C)." were true, it would still be irrelevant, since it would not change this legislative history of the 2002 Bioterrorism Act indicating Congress' understanding of USDA's limited authority under the VSTA. But USDA in any event misstates the effect of 7 U.S.C. § 8401(g)(1)(C). That section requires the Secretary of Agriculture to exempt, from the Bioterrorism Act's regulatory controls for dangerous biological agents and toxins, "products that…contain overlap agents or toxins" and that are licensed under the VSTA. Id. But "overlap agent or toxin" is defined as a biological agent or toxin that is both listed by the Secretary of Agriculture as an agent or toxin that "has the potential to pose a severe threat to animal or plant health, or to animal or plant products" under the Bioterrorism Act and listed by the Secretary of Health and Human Services, pursuant to 42 U.S.C. § 262a(a)(1), as an agent or toxin that can pose a severe threat to human health. The Bioterrorism Act does not provide a general exemption for biological products regulated under the VSTA, as USDA asserts. 22 II. Contrary to USDA's Claim in this Litigation, It Is Not Preventing Creekstone from Conducting Private BSE Testing Because of Animal Health Concerns. Apparently recognizing the flimsy support for its assertion of authority under the VSTA to prevent use of biological products for reasons unrelated to animal health, USDA now claims that its "regulation of BSE test kits"— presumably including its ban on the use of BSE test kits by Creekstone and other private parties—"does serve animal health concerns." USDA Br. at 22; see also USDA Br. at 4 ("USDA's regulation of BSE test kits is indisputably prompted by animal health concerns"). The basis for that assertion, however, is hard to discern and impossible to fathom. USDA repeats its curious assertion that preventing Creekstone from conducting private testing of cattle slaughtered by Creekstone "ensur[es] that BSE test kits are used in a scientifically sound and effective manner to accurately diagnose the disease," thereby "protecting the health of the nation's livestock." USDA Br. at 22. But Creekstone never proposed to use the BSE test kits for purposes of "diagnosing" the disease as USDA uses that term, i.e. determining whether USDA's BSE mitigation measures are sufficient by assessing whether dead cattle were infected with BSE.14 Creekstone never 14 See USDA Br. at 4-6. In the context of whether Creekstone's plans involved "treatment of domestic animals," USDA argues that "a biological product's use 23 proposed to use the BSE test kits for purposes of protecting the health of the nation's livestock, but in any event there is no reasonable grounds for USDA to assert that additional, voluntary BSE testing by Creekstone, which would not affect USDA's ongoing BSE surveillance testing one way or the other, could have an adverse effect on animal health. See, e.g., Creekstone Br. at 29-30; Brown Decl. ¶ 14 (App. 261) ("Voluntary testing does not interfere with or dilute government efforts to test for BSE and to understand the disease."); id. ¶ 15 (App. 261); declaration of former USDA BSE expert Dr. Linda Detwiler ¶ 21 (App. 432-33) (same); see also id. ¶ 24 (App. 433-34) (noting USDA allows the poultry industry to test poultry for antibodies indicating past exposure to avian influenza, even though the disease is extremely rare in commercial poultry operations and the test does not guarantee that the poultry are free from early stages of avian influenza). USDA's unsupported, fact-defying assertion that it is blocking Creekstone's BSE testing plans because of "animal health concerns" was must be 'determined through an objective standard and not a subjective one.'" USDA Br. at 2. It is only in USDA's subjective, tautological view—BSE tests are only used for government BSE surveillance, because that is all USDA allows—that all BSE test kits would be considered to be intended for use in protection of animal health. Objectively, Bio-Rad sells millions of the same BSE test kits Creekstone proposes to use in Japan and Europe for testing healthy cattle at slaughter as an additional safeguard against contaminated meat reaching consumers, not solely to protect animal health. See Creekstone Br. at 11-13. 24 correctly rejected by the District Court. Creekstone, 517 F. Supp.2d at 16 n.14 (App. 481). USDA now claims it is "preventing the cost of worthless products from adversely affecting farmers." USDA Br. at 22. Apparently USDA is suggesting that preventing Creekstone's competitors from wanting to purchase BSE test kits because customers favor meat from plants that perform BSE testing falls within its authority under the VSTA. This contorted effort by counsel to concoct some connection between prohibiting voluntary BSE testing and the VSTA belies the lack of any true concordance between USDA's motivations in prohibiting Creekstone's voluntary testing program and the reasons for which Congress enacted the VSTA. This Court should not be distracted by these smokescreens: it is abundantly clear that USDA's reasons for preventing Creekstone from testing the carcasses of its own cattle to determine if they might carry infectious BSE prions have nothing to do with the protection of the health of those cattle or of other livestock owners' cattle. See, e.g., Creekstone Br. at 18-21, 64-65. Even if USDA had authority to restrict the possession and use of BSE test kits when they are being used for disease surveillance, based on concerns about their sensitivity, that still would not mean that the VSTA grants USDA authority to prohibit access to and use of those BSE test kits for all other purposes. Cf. USDA Br. at 22. The language and legislative history of the VSTA does not 25 provide any support for that view, and USDA itself has previously acknowledged that, just because a biological product is subject to regulation under the VSTA for some purposes does not mean it is subject to regulation under the VSTA for all purposes. See Creekstone Br. at 32-33. III. USDA Has Not Justified its Claim to Deference for its Overbroad Interpretation of its Regulatory Authority Under the VSTA. In its opening brief, Creekstone demonstrated that USDA's interpretation of the extent of its authority under the VSTA is not entitled to deference for a number of reasons. Creekstone Br. at 53-57. USDA has failed to undercut that demonstration. An agency's interpretation of a statute that expands the agency's authority beyond that explicitly stated in the statute is not entitled to deference. Creekstone Br. at 56; see also Aid ash'n for Lutherans, 321 F.3d at 1175; Railway Labor Executives, 29 F.3d at 671. USDA fails to respond directly to the extensive body of case law applying that principle of judicial review, asserting simply that its interpretation "should not be set aside as long as it bears some relationship to the statute." USDA Br. at 16, citing Planned Parenthood Fed'n of Am. v. Heckler, 712 F.2d 650, 655 (D.C. Cir. 1983). But that is not what Planned Parenthood says. In that case, this Court said that one of the instances in which an agency's regulations would be declared in excess of 26 statutory authority is if those regulations "bear no relationship to any recognized concept of the statutory terms at issue." 712 F.2d at 655 (quotation and citation omitted). But the opinion went on to state that: "Agency action must be found to be consistent with the congressional purposes underlying the statute" and that "regulations can be sustained only if this reviewing court [is] reasonably able to conclude that the grant of authority contemplates the regulations issued." Id. (quotations and citations omitted). USDA also cites Nat'l Mining, 512 F.3d at 709, as if that decision stood for the proposition that agency regulations, issued pursuant to authority to promulgate regulations necessary to carry out the statute, are necessarily entitled to deference. USDA Br. at 16. But Nat'l Mining addressed whether such a delegation of rulemaking authority included the authority to interpret an ambiguous statutory phrase. The decision turned on the Court's conclusion that the relevant statutory phrase was sufficiently ambiguous to allow "multiple and divergent interpretations," and therefore the Court would defer to a reasonable agency interpretation of the phrase under Step Two of the Chevron analysis. 512 F.3d at 707-709. Even where the statute contained an ambiguous phrase for the agency to interpret (a situation not present here), the Court looked at whether the agency had explained its interpretation in a "detailed and reasoned fashion" and assessed whether the agency's interpretation was consistent with the 27 underlying statutory scheme. Id. at 710. As Creekstone has already noted, USDA has never given that sort of reasoned and detailed explanation of the statutory basis for 9 C.F.R. § 102.5(d) or for USDA's voluntary BSE testing ban. To the contrary, the Agency's ostensible explanations have continued to evolve—even during the course of this litigation. Creekstone noted the extensive case law indicating that an agency's statutory interpretation is not entitled to deference where the agency has not provided a thorough explanation of the basis for that statutory interpretation. Creekstone Br. 54-56. USDA does not controvert Creekstone's statement that the agency never provided, in conjunction with issuance of its regulations asserting broad authority to restrict the use of biological products in the interest of public health and welfare, any explanation—let alone a sufficient one—of the basis for that regulation in its statutory authority under the VSTA.15 USDA's response is simply to say that Creekstone's description of that principle of judicial review is wrong, citing Aid ash'n for Lutherans, 321 F.3d at 1174. See 15 Compare Creekstone Br. at 53-54 with USDA Br. at 15-16. USDA just says that it determined that such authority was needed. USDA Br. at 15-16. But an agency's conclusion that a regulation would be good policy is not a substitute for clear statutory authorization for such a regulation. See Creekstone Br. at 44, 67; see also New York v. EPA, 443 F.3d 880, 889 (D.C. Cir. 2006), cert. denied 127 S. Ct. 2127 (2007). Nor does an explanation provided only after the fact in the agency's litigation position suffice. See, e.g., Bowen, 488 U.S. at 212-13; PanAmSat Corp. v. F.C.C., 198 F.3d 890, 897 (D.C. Cir. 1999). 28 USDA Br. at 16 n.6. But that decision says nothing of the sort. In Aid ash'n for Lutherans, this Court found no need to defer at all to the Postal Service's interpretation of the statute, because the statutory term was not ambiguous. 321 F.3d at 1178. Even if the term had not been ambiguous, the Court would not have deferred to the Postal Service's interpretation because that interpretation was "utterly unreasonable in the breadth of its regulatory exclusion" and there was "nothing in this record to indicate that Congress empowered the agency to effect" the blanket exclusion the Postal Service had adopted.16 Id. Finally, in response to Creekstone's citation to cases where this Court and the Supreme Court have accorded less deference to an agency interpretation that was arrived at only long after the statute was enacted, Creekstone Br. at 56- 57, USDA claims, somewhat disingenuously, that its current view of its extraordinarily broad regulatory authority under the VSTA has actually been its view for the past 60 years. USDA Br. at 15-16. But the rule that USDA cites, allowing restrictions on who may use a biological product where necessary "to protect the public and the livestock industry," related only to "special licenses," which could "be issued in particular cases for preparation of biological products for experimental or trial use," 13 Fed. Reg. 9296, 9298 (Dec. 31, 1948). The 16 In fact, Aid ash'n for Lutherans reinforces a number of the principles of judicial review that compel rejection of USDA's over-broad assertion of authority here. See id., 321 F.3d at 1174-78; see also pp. 7, 25, supra. 29 other rulemaking USDA claims supports its position concerned "special licenses" that could be issued "when, in the opinion of the Director, the laboratory and other research data and other information available with respect to the product show that the product has value in the treatment of domestic animals but that the results of its use under a larger variety of conditions should be further evaluated prior to release under a regular license." 23 Fed. Reg. 9933, 10,048 (Dec. 23, 1958). USDA's assertion in those rulemakings that, rather than deny a license where sufficient information was not yet available, it could instead issue a license but only for specified uses hardly constitutes a conclusion by USDA that it had authority to impose whatever constraints on a biological product it believed to be in the public interest. In fact, USDA cannot point to any assertion of such broad authority over biological products, unrelated to animal health, prior to this case. See pp.13-14, 23, supra. CONCLUSION For the reasons stated above, the Court should hold that USDA's regulations, codified at 9 C.F.R. §§ 104.1 and 102.5(d), exceed USDA's authority under the VSTA and are unlawful to the extent they authorize USDA to specify who may obtain and use biological products, and for what purpose. Alternatively, the Court should hold that those regulations may not lawfully be 30 interpreted to allow USDA to ban or restrict access to and use of biological products for reasons unrelated to animal health; specifically, that they may not be interpreted to prevent the use of biological products to protect consumers from supposedly misleading information about meat, protect the reputation of the U.S. meat supply, or protect some meat packers from competition posed by other meat packers that test for BSE. Dated April 7, 2008 Respectfully submitted, ______________________________ Russell S. Frye FryeLaw PLLC 1101 30th Street, N.W., Suite 220 Washington, DC 20007-3769 (202) 572-8267 Fax: (866) 850-5198 Email: [email protected] _______________________________ William L. Miller The William Miller Group, PLLC 1666 Connecticut Ave., N.W., Suite 222 Washington, DC 20009 (202) 256-2306 Fax: (202) 318-2427 Email: [email protected] _______________________________ Peter C. Choharis Choharis Global Solutions 1101 17th Street, N.W., Suite 1220 Washington, DC 20008 31 (202) 293-5340 Email: [email protected] Counsel for Creekstone Farms Premium Beef, L.L.C. 32 CERTIFICATE OF COMPLIANCE WITH TYPE-VOLUME LIMITATIONS, TYPEFACE REQUIREMENTS, AND TYPE STYLE REQUIREMENTS 1. This brief complies with the type-volume limitation of Fed. R. App. P. 28.1(e)(2)(B) because this brief contains 6975 words. 2. This brief complies with the typeface requirements of Fed. R. App. P. 32(a)(5) and the type style requirements of Fed. R. App. P. 32(a)(6) because this brief has been prepared in a proportionally spaced typeface using MS Word with Times New Roman font and 14-point type. Russell S. Frye CERTIFICATE OF SERVICE I hereby certify that, on this 7th day of April, 2008, I have caused two copies of the foregoing reply brief of appellee/cross-appellant Creekstone Farms Premium Beef, L.L.C. to be served by placing them in the U.S. Mail, postage prepaid, addressed to: Eric Fleisig-Greene Civil Division, Room 7214 U.S. Department of Justice 950 Pennsylvania Avenue, N.W. Washington, DC 20530-0001 _________________________ Russell S. Frye
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