{"id":13214,"date":"2024-06-24T01:59:45","date_gmt":"2024-06-24T06:59:45","guid":{"rendered":"https:\/\/agrilife.org\/texasaglaw\/?p=13214"},"modified":"2026-04-17T15:10:22","modified_gmt":"2026-04-17T20:10:22","slug":"federal-judge-enjoins-usda-from-using-socially-disadvantaged-farmer-rancher-category-in-making-erp-2022-payments","status":"publish","type":"post","link":"https:\/\/agrilife.org\/texasaglaw\/2024\/06\/24\/federal-judge-enjoins-usda-from-using-socially-disadvantaged-farmer-rancher-category-in-making-erp-2022-payments\/","title":{"rendered":"Federal Judge Enjoins USDA from Using “Socially Disadvantaged Farmer\/Rancher” Category in Making ERP 2022 Payments"},"content":{"rendered":"

A federal judge in Texas entered an injunction in\u00a0Strickland v. USDA<\/em>\u00a0prohibiting the USDA from providing increased payments or additional relief to those meeting its definition of a “socially disadvantaged farmer or rancher” in its ERP 2022 program.\u00a0 [Read Opinion and Order here<\/a>.]\u00a0 While the injunction applies only to ERP 2022, the Court’s discussion of the Plaintiffs’ likelihood of success on the merits could seemingly apply to other programs for which the “socially disadvantaged” categorization is used.<\/p>\n

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Photo by Robert Wiedemann<\/em><\/p><\/div>\n

Background<\/strong><\/p>\n

Plaintiffs are Texas farmers who sued the USDA alleging the USDA’s administration of several disaster programs was unconstitutional.\u00a0 Plaintiffs challenged a total of eight USDA programs, of which only one, ERP 2022, remains active. Plaintiffs based their claims essentially on two different arguments.<\/p>\n

First, the Plaintiffs argued the USDA’s payment methodology that provides additional funds to those producers meeting the definition of a “socially disadvantaged producer” violates the Equal Protection Clause.\u00a0 A “socially disadvantaged farmer or rancher” is defined as including:\u00a0 (1) American Indians or Alaskan Natives; (2) Asians or Asian-Americans; (3) blacks or African-Americans; (4) Hispanics or Hispanic-Americans; (5) Native Hawaiians or other Pacific Islanders; and (6) women.\u00a0 [Read Complaint here<\/a>.]\u00a0 The USDA admitted the disaster programs at issue benefit minority and female producers because doing so “reflects the agency’s interest and goal of remedying the persistent effects of past discrimination…”<\/p>\n

Second, Plaintiffs argued the USDA’s use of “progressive factoring” was arbitrary and capricious. Progressive factoring is a method that ensures limited funding is distributed in a manner benefiting the majority of producers, rather than a few.\u00a0 This results in increasing payments to most participants by decreasing larger potential payments, which increases the proportion of funding to smaller producers. For example, under the prior “flat-rate” model, all producers would have received a flat percentage of loss payment which was a 75% payment rate for white male farmers under ERP 2022.\u00a0 Under progressive factoring, however, “farmers losing more recover less, while farmers losing less recover more.\u00a0 So a farmer claiming losses of up to $2,000 may recover 100 percent of that loss, while a farmer claiming losses over $10,000 may recover only 10 percent of that loss.”<\/p>\n

Additionally, under progressive factoring, USDA exempted refunds of insurance premiums, which were provided to “underserved” producers, who are beginning, limited resource, socially disadvantaged, or veterans.\u00a0 In other words, for “underserved” producers, their share of the crop insurance fee and premium was added to their\u00a0 ERP 2022 payment.<\/p>\n

Plaintiffs moved for a preliminary injunction to prevent the USDA from continuing to make payments in this manner.\u00a0 [Read Motion here<\/a>.]\u00a0 The USDA responded claiming Plaintiffs suffered no irreparable injury, and the programs are either race and gender neutral or otherwise justified.\u00a0 [Read Response here<\/a>.]<\/p>\n

Preliminary Injunction Standard<\/strong><\/p>\n

To obtain a preliminary injunction, the Plaintiffs must show: (1) substantial likelihood of success on the merits; (2) a substantial threat of irreparable harm if the injunction is not granted; (3) that the threatened injury outweighs damage the proposed injunction may cause Defendants; and (4) granting the injunction is not against the public interest.<\/p>\n

District Court Opinion and Order<\/strong><\/p>\n

Federal district judge, Matthew Kacsmaryk, granted the injunction in part.\u00a0 [Read Opinion and Order here<\/a>.]<\/p>\n

Progressive Factoring<\/em><\/p>\n

First, the Court addressed the arguments related to progressive factoring.<\/p>\n

Arbitrary and Capricious Claim<\/span><\/p>\n

The Court first looked at whether progressive factoring was arbitrary and capricious.\u00a0 To satisfy this review, the USDA must “articulate a satisfactory explanation for the action including rational connection between the facts found and the choice made.”\u00a0 In other words, the Court determines whether the agency action was reasonable.<\/p>\n

Plaintiffs raised their arbitrary and capricious claim only with regard to the USDA’s use of progressive factoring, not its use of the “socially disadvantaged” category.\u00a0 Plaintiffs argued because progressive factoring was a change from prior flat-rate relief models, the USDA needed to explain in detail how this change accounted for serious reliance interests on the prior model.\u00a0 This, Plaintiffs argued, USDA failed to do.<\/p>\n

The Court disagreed.\u00a0 Plaintiffs’ claimed reliance on the flat-rate model was not based on USDA’s statutory interpretation, but instead on “a means of remuneration subject to agency discretion.”\u00a0 \u00a0Further, given the ad hoc<\/em> nature of the programs at issue, the Plaintiffs’ claims that they need to rely on the flat-rate model payments for budgeting were unpersuasive.\u00a0 It is up to the discretion of the USDA to determine how to allocate the resources appropriated by Congress, and it does so differently with regard to each program.\u00a0 Because of this, the Plaintiffs did not show the necessary reliance interest.<\/p>\n

With regard to ERP 2022, the program the Plaintiffs claim was arbitrary and capricious, given the\u00a0ad hoc<\/em> nature of the payments depending entirely on Congressional funding, the Plaintiffs cannot have reasonably relied on past programs’ allocation methods.\u00a0 Thus, the Court held progressive factoring policy “easily satisfies arbitrary-and-capricious review under the Administrative Procedures Act.”<\/p>\n

Major Questions Doctrine\u00a0<\/span><\/p>\n

Next, the Court held progressive factoring did not implicate the major questions doctrine (MQD).<\/p>\n

The MQD applies only in “extraordinary cases” involving decisions of “vast economic and political significance” or assertions of “extravagant statutory power of the national economic” or “highly consequential power beyond what Congress could reasonably be understood to have granted.”\u00a0 It is relevant “only when agency action involves a novel or unprecedented interpretation of regulatory authority involving ancillary statutory provisions.”<\/p>\n

The Court offered two reasons why the MQD does not apply here.\u00a0 First, the Plaintiffs did not even address the scale of ERP 2022’s relief to women and minorities.\u00a0 Meanwhile, the USDA claimed the total amount of ERP payments to women and minorities was significantly lower than prior years and does not qualify as extraordinary.\u00a0 Second, the USDA’s “socially disadvantaged” category “is neither novel nor unprecedented” as it has been used by the UDSA for roughly 20 years.<\/p>\n

Therefore, none of the Plaintiffs’ challenged programs implicate the MQD.<\/p>\n

Socially Disadvantaged Producer Classification\u00a0<\/em><\/p>\n

Next, the Court turned to the Plaintiffs’ challenge to the “socially disadvantaged” classification.<\/p>\n

Likelihood of Success on the Merits<\/span><\/p>\n

The Court initially noted that Supreme Court precedent “bears little tolerance” for dividing people based on race. Race-based classifications are presumptively unconstitutional.\u00a0 To overcome that presumption, the USDA must meet the “daunting two-step examination” of strict scrutiny.\u00a0 First, the USDA must show treating races differently is done to further a compelling government interest.\u00a0 Second, it must show its use of race is narrowly tailored (meaning necessary) to achieve the compelling government interest.<\/p>\n