California District Court Finds Defendants’ Conduct Was Not Arbitrary and Capricious Under Administrative Procedure Act

Citing the Administrative Procedure Act (APA), and recognizing the role of the district court in reviewing a final agency determination under the act, the U.S. District Court for the Northern District of California granted summary judgment to defendants Federal Crop Insurance Corp. (FCIC) and the U.S. Department of Agriculture’s Risk Management Agency (RMA), finding that the defendants’ determination was not plainly erroneous, arbitrary, or capricious.

Plaintiff M&T Farms purchased a crop protection insurance policy from Producers Agriculture Insurance Co. (ProAg) to insure its products from loss of revenue. The insurance policy issued by ProAg was reinsured by defendant FCIC. M&T submitted a claim under the policy, after which ProAg canceled the policy on the grounds that M&T was not a “qualifying person” under the policy and was not entitled to coverage. M&T then filed for arbitration challenging ProAg’s cancellation of the policy. As part of the arbitration, the arbitrator authorized M&T and ProAg to seek an interpretation of the policy from RMA in accordance with federal regulations. After seeking interpretations from the parties on the relevant issues, RMA accepted ProAg’s interpretation, which resulted in a determination of no coverage under the policy.

After an unsuccessful appeal to the National Appeals Division of the Department of Agriculture, M&T filed an action against FCIC and RMA seeking a declaratory judgment regarding the administrative determinations issued by RMA rejecting the claim for coverage under the policy. In granting the motion for summary judgment filed on behalf of defendants RMA and FCIC, the district court first noted that the arbitrator’s factual findings during the arbitration were not the subject of the present lawsuit, and the court’s review was limited to determining whether the defendants’ interpretations of the policy and handbook were arbitrary and capricious. The court first noted that FCIC’s interpretations should be given “substantial deference” given the broad grant of authority to the FCIC. The court then found the defendants’ interpretation of the policy and handbook was reasonable and was not arbitrary or capricious. In confirming the applicable standard of review, the court found that the determinations were not plainly erroneous and should not be vacated.

M&T Farms v. Federal Crop Insurance Corp., No. 5:21-cv-09590 (N.D. Cal. Mar. 9, 2023).