Case 1:21-cv-02702-RLY-DML Document 1 Filed 10/25/21 Page 1 of 11 PageID #: 1
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF INDIANA
`INDIANAPOLIS DIVISION
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`Case No. 1:21-CV-2702
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`RJMC Farms, LLC,
`Michelle Farms, LLC,
`Renee Farms, LLC, and
`Jennifer Farms, LLC,
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`Plaintiffs,
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`v.
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`Thomas James Vilsack, Secretary, United
`States Department of Agriculture, and
`Frank M. Wood, Director, National
`Appeals Division,
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`Defendants.
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`COMPLAINT FOR JUDICIAL REVIEW AND DECLARATORY RELIEF
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`Plaintiffs, RJMC Farms, LLC (“RJMC”), Michelle Farms, LLC (“Michelle Farms”), Rene
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`Farms, LLC (“Renee Farms”), Jennifer Farms, LLC (“Jennifer Farms”), state as follows for their
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`Complaint for Judicial Review against Thomas James Vilsack, Secretary, the United States
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`Department of Agriculture (the “Secretary”) and Frank M. Wood, Director, National Appeals
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`Division (“Director”).
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`PARTIES
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`1.
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`RJMC is an Indiana limited liability company with its principal place of business
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`in Davies and Knox Counties, Indiana.
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`2.
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`Michelle Farms is an Indiana limited liability company with its principal place of
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`business in Davies and Knox Counties, Indiana.
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`

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`3.
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`Renee Farms is an Indiana limited liability company with its principal place of
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`business in Davies and Knox Counties, Indiana.
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`4.
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`Jennifer Farms is an Indiana limited liability company with its principal place of
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`business in Davies and Knox Counties, Indiana.
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`5.
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`The Secretary is the Secretary of the United States Department of Agriculture
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`(“USDA”) and is charged with the duty of administering the USDA.
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`6.
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`The Director is the director of the National Appeals Division (“NAD”), a division
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`of the USDA, and is charged with the duty of administering all proceedings within the NAD.
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`NATURE OF CLAIM
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`7.
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`Plaintiffs seek review of the final determination of the NAD issued by the Director,
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`dated August 20, 2021, erroneously determining that the Risk Management Agency (“RMA”) did
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`not err in placing Plaintiffs on the Ineligibility Tracking System list (the “ITS List”).
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`JURISDICTION AND VENUE
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`8.
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`Review of a final determination of the NAD is properly before this Court pursuant
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`to 28 U.S.C. § 1331, 7 U.S.C. § 6999, 7 C.F.R. § 11.13, and 5 U.S.C. §§ 701-706.
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`9.
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`This case is properly before the United States District Court for the Southern
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`District of Indiana pursuant to 28 U.S.C. § 1391(e).
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`REQUEST FOR JUDICIAL REVIEW
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`10.
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`Plaintiffs’ Farming Operations and Insurance Coverage. Plaintiffs are a
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`collection of family farming entities that farmed soybeans and corn in Indiana during the 2009-
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`2014 crop years, each of which insured crops under the Federal Crop Insurance Act (“FCIA”).
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`This Judicial Review Action relates specifically to the 2011 crop year, for which Plaintiffs insured
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`2
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`their crops with a Multiple Peril Crop Insurance Policy (the “MPCI Policy”) purchased from
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`Diversified Crop Insurance Services (“Diversified”).
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`11.
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`The Now-Withdrawn Report of Initial Findings. The dispute in this case began
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`in 2015, when the USDA Office of Inspector General investigated Appellants’ farming operations.
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`Finding nothing actionable, the US Attorney refused to prosecute and in 2015 turned the matter
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`over to RMA, which ostensibly investigated the matter for another three years. Ultimately, RMA
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`issued an August 30, 2018 Report of Initial Findings (the “2018 Initial Findings”) to Diversified
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`relating to the 2011 MPCI Policy.1 The 2018 Initial Findings determined that Appellants lacked
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`an insurable interest in the 2011 crop year and misrepresented eligibility as an insurable entity. As
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`a result, RMA voided Appellants’ 2011 policies and determined overpaid indemnity totaling
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`$372,194. (App. Ex. A, p. 2.) RMA also specifically directed Diversified to void the policies.
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`(Id.) The 2018 Initial Report (as with the majority of RMA’s actions in this case) was substantively
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`flawed for numerous reasons not at issue in this case or the underlying NAD Appeal.
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`12.
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`Diversified’s Compliance with RMA’s Voidance Directive. Diversified, without
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`conducting any independent inquiry to confirm the 2018 Initial Findings, complied with RMA’s
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`directive. In its October 12, 2018 letter to RMA, Diversified stated that “in response to a request
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`to void policies... we have voided the policies.”
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`1 A similar report was sent to Rural Crop Insurance Services (“RCIS”), the approved insurance
`provider for Appellants during crop years 2009-2010 and 2012-2014.
`3
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`

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`Diversified enclosed a summary of amounts due and asked for RMA’s approval of the numbers.
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`13.
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`Diversified’s Determination to Appellants. On January 4, 2019, Diversified
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`notified Appellants of RMA’s voidance and determination of debt. This letter again illustrated that
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`Diversified conducted no independent investigation of the matters contained in the 2018 Initial
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`Finding, simply stating “[a]s a result of the MRCO’s finding, we have determined that you
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`misrepresented the LLCs eligibility.” (Id.). Essentially, Diversified was acting merely as the
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`conduit for RMA’s 2018 Initial Determination, which was the operative document voiding
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`Appellants’ policies. At this time, Diversified notified Appellants of the overpaid indemnity
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`(which were the same figures determined by RMA minus the premiums), and gave the requisite
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`ITS disclosures.
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`14.
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`Entry into Payment Agreements. The unexpected (and facially defective)
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`demand for such a high payment (in addition to a similar demand from RCIS) relating to a crop
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`year nine years in the past obviously put Appellants in a bind. They wished to contest the debt;
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`however, the only way they could do so while ensuring their continued eligibility was to enter into
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`Payment Agreements to allow for the amounts to be paid under protest. Ultimately, Appellants
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`entered into Payment Agreements with Diversified.
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`15.
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` Appellants’ Initial Round of NAD Appeals. With the Payment Agreements in
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`place, Appellants began the process of contesting the baseless underlying determination: the 2018
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`Initial Determination. Appellants began NAD Appeals relating to both the 2018 Initial
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`Determination directed to Diversified as well as the analogous document directed to RCIS. During
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`the NAD Appeals, RMA issued a successor document to the 2018 Initial Determination in the
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`form of an MRCO Final Finding (the “2019 Final Finding”). This became the focus of the appeals,
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`but as with the 2018 Initial Findings, the 2019 Final Findings:
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`4
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` Voided Appellants’ policies;
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` Directed Diversified to void Appellants’ policies and recover the
`overpayment; and
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` Confirmed that Diversified had complied with RMA’s October 2018
`directive, noting “you have voided the subject policies”
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`Again, Diversified took no independent action, neither conducting a separate investigation nor
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`reaching an independent conclusion regarding the matters addressed in the 2019 Final Finding. At
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`this point, the only basis for the debt claimed in the Payment Agreements was the now-superseded
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`2018 Initial Findings.
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`16.
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`RMA’s Withdrawal of the 2019 Final Findings. Appellants spent significant time
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`and effort within their NAD appeals, and ultimately, RMA withdrew the 2019 Final Findings,
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`admitting that it had overstepped its authority in voiding (and ordering the voidance) of
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`Appellants’ policies. It seems also likely that RMA did not like the prospect of defending its
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`determination, which would require litigation of facts over a span of ten years, multiple entities,
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`and would have required voluminous documentation to support. Unquestionably, however, RMA
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`admittedly recognized the legal error it had made:
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`The original findings also, however, stated that RMA was “voiding”
`Appellants’ policies, see RMA 204 – an action that RMA has no
`legal authority to take and that is inconsistent with current Agency
`policy to limit role in making and issuing reinsurance compliance
`findings solely to that of a reinsurer. Upon recognizing its error
`during the ensuing NAD proceedings, the Agency rescinded its
`original set of findings and determined to review and issue a new set
`of findings consistent with the scope of its legal authority...
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`On April 26, 2019, RMA transmitted a letter to Appellants’ counsel that formally
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`withdrew the 2018 Initial Finding and 2019 Final Findings to Diversified and RCIS. The letter
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`included the following statement pertinent to this case:
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`5
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`At this time no additional action is required by either AIP for the
`policies referenced above. As
`to
`these policies, additional
`information will be issued by the Midwest Regional Compliance
`Office at a later date. As to any repayment plans entered into with
`the insureds, we suggest that those be held in abeyance until the
`Midwest Regional Compliance Office gives further notices related
`to the policies.
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`These statements are fraught with meaning, but the clear effect of the letter (and its specific
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`provision to Appellants by RMA) was that that RMA was giving up for the time being and that
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`everyone should stand down. With respect to the Payment Agreements, this made complete sense,
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`as the sole and exclusive basis for Diversified’s determination and actions had been
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`withdrawn.2
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`17.
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` Dismissal of the NAD Appeals. With the issuance of the Withdrawal, the NAD
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`appeals ostensibly became moot. Based on this portrayal, and in reliance on the April 26, 2019
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`letter, Appellants did not object to the NAD’s Notice of Intent to Dismiss the Appeals.3
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`However, RMA and Diversified concealed from Appellants that, in reality, the 2018 Initial
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`Finding and the 2019 Final Finding were still operative. Again, these comprised the sole basis for
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`Diversified’s determination, and Diversified explicitly and unambiguously confirmed that it
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`voided Appellants’ policies at the behest of RMA manifested in these documents. How could
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`Diversified’s January determination possibly stand when the only foundation had been officially
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`rescinded?
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`2 It is arguable that this should have been the case when the actual basis for Diversified’s actions
`(the 2018 Initial Findings) was superseded by the 2019 Final Findings; however, whichever
`document one relies on, it was explicitly withdrawn by the April 2019 letter.
`3 See also App. Ex. AA, p. 1. In inquiring whether Appellants intended to oppose dismissal, RMA
`explicitly referenced the April 2019 rescission letter.
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`6
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`18.
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`RMA’s Issuance of New Findings. On May 6, 2020, RMA issued a new document
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`entitled “Report of Final Finding” (the “2020 Final Finding”). Despite the obvious pertinence to
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`Appellants very livelihoods, nobody – not RMA, Diversified, or RCIS – notified Appellants of
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`this development. The existence of these documents was not brought to Appellants’ attention until
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`August 2020, and even then, Appellants had to institute new NAD appeals to obtain a copy of the
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`2020 Final Findings.
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`19.
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`Diversified’s Determination of Ineligibility. Incredibly, on September 10, 2020,
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`Diversified sent a letter determining that Plaintiffs should be placed on RMA’s ITS List for failure
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`to pay according to the January 30, 2019 Payment Agreements. The letter contained several
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`misstatements, including the misconception that the 2020 Final Findings were a “reissuance” of
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`the previously-made 2018 determinations. This obviously was not the case – the 2018 document
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`was legally defective, outside of RMA’s legal authority, and formally withdrawn in 2019. The
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`2020 Final Findings were completely new determinations.
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`Through counsel, Appellants requested Diversified withdraw its ITS Determination, citing
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`much of the above-referenced factual background. Diversified responded, claiming for the first
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`time that the voidance of 2011 crop policies was DCIS’s own decision, and that the January 4,
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`2019 letters still stood. RMA subsequently put the Appellants on the ITS List, necessitating an
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`NAD appeal.
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`20.
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`Diversified’s Delays In Reporting the “Delinquent Debt.” Diversified’s
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`determination to put Plaintiffs on the ITS List was itself delinquent. Diversified alleged that the
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`Plaintiffs’ failure to make payment under the Payment Agreements rendered the “debt” delinquent,
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`but waited fourteen (14) months from the date of the first missed payment to report the alleged
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`delinquency to RMA. As noted by the NAD Director, AIPs must certify a debtor’s ineligibility by
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`7
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`transmission of a record to ITS “not later than 21 days” after failure to make payments under a
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`written payment agreement. (Director Review Determination, citing ITS Handbook FCIC-24050,
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`¶ 13A(3).) As such, the NAD Director determined that RMA “failed to enforce its own regulation
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`and its own procedural requirement.” (Id.) In the Director Determination, the Director questioned
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`whether this anomaly caused any damage; however, in reality, it certainly did. Due to the
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`retroactivity of the placement on the ITS List, Plaintiffs are subject to reimbursement demands of
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`indemnities that have been paid for undisputed covered losses, which would not have happened
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`had Diversified timely made its determination (or, more relevant here, if RMA had complied with
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`its own regulations and procedural rules). Of course, the delay was certainly because Diversified
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`did not intend to enforce the Payment Agreement (in accordance with RMA’s letter), until the May
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`6, 2020 Findings provided a new basis to do so (however flawed they may be). It improperly did
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`so by invoking the utterly invalid Payment Agreements, based on undisputedly legally improper
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`findings from RMA. When RMA failed to comply with its rules and regulations (for the reasons
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`of timeliness and others), it erred by putting the Plaintiffs on the ITS List.
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`21.
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`The NAD Hearing. The Plaintiffs and RMA conducted a telephone hearing before
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`the NAD Administrative Judge on December 8, 2020, which was followed by post-hearing
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`briefing. The argument at the hearing and the briefs focused on two independent but related issues:
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`(a) whether the Regulations covering determination of a delinquent debt located in 7 C.F.R. Part
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`400, Subpart U in place during the 2011 crop year (the “2011 FCIP Regulations”) applied, or
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`whether the revised, broader 2014 Regulations (the “2014 FCIP Regulations”) applied, and thus,
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`(2) whether RMA complied with the applicable regulations. There was no argument by RMA that
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`the regulations at issue were not the applicable authorities; rather, the issue in dispute was which
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`8
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`regulatory scheme applied. RMA affirmatively alleged in its briefing that the 2014 FCIP
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`Regulations should control.
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`22.
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`The Appeal Determination. In the Appeal Determination, the Administrative Judge
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`correctly found that the 2011 FCIP Regulations applied to this case, but created an unfounded
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`distinction in the types of payment agreements to reach the conclusion that the Subpart U
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`regulations did not apply at all. Essentially, the Administrative Judge found that the Subpart U
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`Regulations only apply to Post-Ineligibility Payment Agreements, and thus did not apply to the
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`Payment Agreements at issue, which the Administrative Judge found to be Pre-Ineligibility
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`Payment Agreements. There was no justification for this distinction in the regulatory scheme,
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`which only referred to written payment agreements to avoid delinquency or ineligibility due to
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`a delinquent debt. See, e.g., 7 C.F.R. § 400.677.
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`23.
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`The Error in the Appeal Determination. Because the 2011 FCIP Regulations
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`applied, it was and is clear that RMA did not satisfy its obligations with respect to a determination
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`of a debt. “Delinquent debt” is defined by 7 C.F.R. § 400.677 as:
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`Any debt owed to FCIC or the insurance provider… that has not been paid… or any
`overdue debt owed to FCIC or the insurance provider which is the subject of a
`scheduled installment payment…
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`(emphasis added). The terms of the MPCI Policy explicitly incorporate this definition. For there
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`to be a “delinquent debt,” there must be a “debt,” a fact explicitly admitted by RMA during the
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`hearing. There was indisputably no “debt” owed by Appellants by virtue of the January 4, 2019
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`letter. “Debt is defined in the 2011 FCIP Regulations as follows:
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`Debt. An amount of money which has been determined by an appropriate agency
`official to be owed, by any person, to FCIC or an insurance provider under any
`program administered under the Act based on evidence submitted by the
`insurance provider.
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`9
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`(2011 FCIP Regulations, 7 C.F.R. § 400.677, emphasis added). In this case, as of the date of the
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`January 4, 2019 letter, there was no valid determination by an appropriate agency official of the
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`debt owed by Appellants to Diversified. Therefore, there could be no debt, and thus no delinquent
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`debt. Extending this fact through to regulations covering payment agreements, it was also
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`indisputable that there could be no valid payment agreement, which likewise requires a “debt.” 7
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`C.F.R. § 400.677.
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`24.
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`Plaintiffs’ Request for Director Review. On March 12, 2021, Plaintiffs instituted a
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`Request for Director Review of the Appeal Determination.
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`25.
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` The Director Determination. On August 20, 2021, the Director issued his Director
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`Review, which upheld the Appeal Determination. The Director correctly concluded that the 2011
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`FCIP Regulations Applied; however, Director misapplied the definition of “debt” contained in the
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`2011 FCIP Regulations, essentially throwing it out in its entirety. The Director also upheld the
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`Administrative Judge’s finding, made without any documentary evidence, that Diversified made
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`its own determination to void the 2011 crop-year policies, resulting in indemnity overpayments.
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`Even had this been true (and, again, there was no evidence that it was), Diversified admitted at the
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`hearing that the sole basis for any such determination was the withdrawn Report of Initial Findings,
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`which even RMA admitted was legally invalid (leading to its withdrawal). The Director
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`Determination was erroneous in finding that there was no error in allowing Diversified – to the
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`detriment of Plaintiffs – to violate the timing requirements of reporting the allegedly delinquent
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`debt, and it was arbitrary, capricious, not in accordance with law, and unsupported by substantial
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`evidence.
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`10
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`REQUEST FOR JUDICIAL REVIEW AND DELCARATORY RELIEF
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`Wherefore, Plaintiffs respectfully requests that the Court:
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`1.
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`Pursuant to the standards set forth in the Administrative Procedures Act, 5 U.S.C.
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`§ 701-06, review the Director Determination and determine and declare that the Determination
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`was unlawful, and in violation of the applicable standards set forth in § 706. Specifically, Plaintiffs
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`request that the Court enter judgment declaring that the Director Determination violated Plaintiffs’
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`right to due process of law, and was not in accord with the governing statutes and regulations,
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`unsupported by substantial evidence, and arbitrary and capricious.
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`2.
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`Enter an order awarding Plaintiffs’ their attorneys’ fees, costs, and other expenses
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`pursuant to 28 U.S.C. § 2412(d)(1)(A).
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`3.
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`Enter an order awarding Plaintiff such further relief as the Court deems just and
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`proper.
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`Dated this 25th day of October, 2021.
`
`s/Jeremiah L. Buettner
`Jeremiah L. Buettner, OBA #21615
`Colby J. Byrd, OBA #33478
`McAfee & Taft A Professional Corporation
`Eighth Floor, Two Leadership Square
`211 North Robinson
`Oklahoma City, OK 73102-7103
`Telephone:
`(405) 235-9621
`Facsimile:
`(405) 235-0439
`jeremiah.buettner@mcafeetaft.com
`colby.byrd@mcafeetaft.com
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`Attorney for Plaintiffs
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`11
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