Copyright 2003 ALM Properties, Inc

National Law Journal

November 3, 2003

SECTION: FRONT PAGE; Vol. 26; No. 10; Pg. 1

USDA under fire;

Farm loan practices are challenged by minorities, women.

Andrew Harris, Staff reporter

Tex hall says his father told him, "Son, don't ever take a loan out with the USDA."

A third-generation cattle rancher and a member of North Dakota's Mandan, Hidatsa & Arikara Nation, Hall's father, Leland, was convinced that the U.S. Department of Agriculture [USDA] was discriminating against him because he was not white.

"I think I'm being treated differently here," Hall recalled his father telling a county-level USDA loan officer 30 years ago.

The prejudice felt by Leland Hall has now blossomed into a series of class actions filed against the department by American Indian, Latino and female farmers, each alleging that the USDA is unwilling to lend money to them on the same terms it offers to white male farmers and is sometimes unwilling to lend them any money at all.

The affected classes encompass tens of thousands of small family farm operators, the plaintiffs' lawyers say.

Three years ago, the USDA entered into a $1 billion settlement with a class of more than 15,000 African-American farmers who made the same allegations. In April, the agency installed its first-ever assistant secretary for civil rights, attorney Vernon B. Parker, 43.

Despite the settlement and the new hire, the plaintiffs' lawyers also say that the agency's overall attitude toward minority farmers is more hostile now than it was six years ago.

Then under the leadership of Secretary Dan Glickman, in 1997 the USDA released its first civil rights action team report, saying the agency has a long history of civil rights failings and promising improvement.

Upon the release of the report, Glickman said, "I'm not here to point fingers or to cast blame. I'm here to say it's time to heal. We cannot change the past but we can and will set a new course for the future of this department."

In a telephone interview, Parker conceded that altering the culture and public perception of an agency created during the Lincoln administration will be difficult.

"The problems did not occur overnight, nor are they going to change overnight," he said.

The agency is often thought of as "the last plantation," he said. "We want to be known for other things."

One of the USDA's missions is to provide financial aid to family farmers whose cash flow is often at the mercy of frosts, storms, droughts, bugs and blights that destroy crops, kill livestock and upset balance sheets. This is done through the USDA's Farm Service Agency. Its lending practices are at the core of the lawsuits.

David Frantz, a partner in Washington's Conlan, Frantz, Phelan & Pires, called the USDA "the lender of last resort." He explained that a farmer seeking to borrow money from the agency must first show that he or she was unable to get a loan from a private lender.

"The USDA is the lender for beginning farmers and the lender for poorer farmers," Frantz said.

To get a loan, a farmer must apply to a county board comprised of neighbors. In deciding, they can consider subjective intangibles such as good character.

Consequently, it's alleged, tens of thousands of minority farmers have been denied loans that they were otherwise qualified for, or given loans on terms less favorable than those given their white male counterparts. Others still were allegedly subjected to inordinate delays in loan-application processing, denied assistance in filling out forms or refused applications altogether.

Compounding the problem, in 1984, the USDA lost funding for its civil rights office and abandoned thousands of filed complaints. "It was a mess," said civil rights lawyer Joseph M. Sellers.

Sellers, a partner at Washington's Cohen, Milstein, Hausfeld & Toll, is one of the lead counsel for a certified class of American Indian farmers believed to comprise more than 15,000. Keepseagle v. Veneman, No. 99-03119 [D.D.C.].

Frantz said that his clients are among the country's poorest farmers, with 70% of them grossing less than $50,000 in revenue per year. "They are the class," he said. "These are the farmers that the USDA was designed for."

It took an act of Congress, in 1998, to restore the rights of minority and women farmers. Under that act, which Frantz said had broad bipartisan support, the statute of limitations was extended so farmers who had filed civil rights complaints with the USDA between Jan. 1, 1981, and July 1, 1997, could participate in one of the suits.

The Keepseagle class closed in 1999, when that complaint was filed. In a telephone interview, Sellers said that he will seek an extension of time to file because the agency's offensive practices have continued to the present.

The black farmers' case

Filed after Keepseagle were the Latino farmers' suit, Garcia v. Veneman, No. 00-CV-2245 [D.D.C.], and the female farmers' suit, Love v. Veneman, No. 00-CV-2502 [D.D.C.]. All three of those cases were filed in the wake of the black farmers' class action, Pigford v. Glickman, No. 97-1978 [D.D.C.].

Affecting a certified class of more than 15,000 and settled for what both sides say will ultimately be more than $1 billion, Pigford was "the largest civil rights case of its nature ever," Frantz said. Despite the size of the deal, both sides say, the Pigford solution is no template for the other cases.

The Pigford pact provided for two different programs, known as Track A and Track B.

On Track A, Frantz said, an aggrieved farmer is entitled to $50,000 in cash plus a $12,500 payment to the Internal Revenue Service to cover any resultant tax liability. Additionally, any indebtedness to the USDA will be forgiven and the farmer will be given a chance to reacquire his foreclosed property from the USDA or buy other land from the agency's inventory.

If a Pigford class member feels that the Track A compensation is inadequate, the member can opt for Track B, a one-day hearing during which the farmer gets the chance to prove that he has been a victim of USDA discrimination and had suffered damages in excess of what the agency is offering on Track A.

A Track B election precludes a Track A recovery, so a class member who opts for a Track B hearing and loses recovers nothing. Only about 240 farmers have opted for that more rigorous all-or-nothing process, Frantz said.

While supporting the settlement concept, Frantz said he did not believe that Pigford provided a useful model. Even "the USDA regards it as a nightmare," he said.

Mark Fleischaker, chairman of Washington's Arent Fox Kintner Plotkin & Kahn, is lead counsel in the Love litigation on behalf of a not-yet-certified class that could include tens of thousands of farmers. He called the Pigford settlement "confusing and complicated," adding, "it scared the Department of Agriculture."

Fleischaker said that he envisions a less complicated and less costly settlement of the Love action, but "we're not at that stage yet."

Steven S. Hill, the lead counsel for the Latino farmers, said that any settlement of the Garcia case would have to include remedial relief, such as reform at the county level. "If you do this right," he said, "a fix for Hispanic farmers should be a fix for all farmers."

Hill, a partner at Washington's Howrey Simon Arnold & White, said that there are approximately 20,000 farmers in the proposed Garcia class. An early certification motion was denied without prejudice subject to discovery. Hill said that he will likely refile by the end of the year.

Parker, the USDA's civil rights chief, said that he wouldn't replicate the Pigford program either. "How do you spend $1 billion and nobody's happy?" he said. "Money is not always the solution. The solution has to be looking at policies....If there has been discrimination, we have to make proper changes."

One of the changes Parker said needed to be addressed is the structure of the USDA's county offices." All politics is local," he said. "These are local issues at the county level."

He said he would like to see more minority participation on those county boards, noting that Secretary of Agriculture Ann Veneman has the authority to appoint board members.

Parker said he wouldn't rule out monetary awards.

"I don't believe the government should pay money where there has been no discrimination, but where there has, we must make people whole," he said, adding that "we have to begin removing people who are discriminating."

Parker's prior government experience was gained at the federal Office of Personnel Management, where he was director of policy and, for two years, its general counsel.

Although his resume does not suggest much civil rights experience, Parker, an African-American, offered a different qualification. "When people mention civil rights," he said, "if you've lived through it yourself and recognize the sacrifices people have made in order for you to be where you are....You live it and breathe it every day."

Despite Parker's optimism, plaintiffs' attorney Frantz said that under the Bush administration, the USDA has become more hostile to minority farmers.

"In terms of these cases, things have certainly gotten worse, " he said.

One major difference between Pigford and Keepseagle, he and Sellers noted, is that in Pigford, the USDA had agreed to a voluntary stay of its foreclosure activities against members of the certified class.

The agency had agreed to a similar temporary stay in Keepseagle, but that expired in January 2001 and has not been renewed. Sellers said that he will soon be filing an application for a court-ordered stay, preserving the status quo for the duration of the case.

Deferring to the U.S. Department of Justice attorneys handling the case, USDA General Counsel Nancy Bryson declined to comment on why the USDA would not voluntarily halt its foreclosures during Keepseagle.

Citing a standing practice of not commenting about pending litigation, Justice Department spokesman Charles Miller also declined to comment on the differing department stance in the Native Americans' case.

Equal treatment

Pigford was filed by Frantz's partner, Alexander Pires. Pires' activities in that case drew the attention of Tex Hall, then a member of the tribal counsel for the united Mandan, Hidatsa & Arikara Nation at the Fort Berthold, N.D., reservation.

Hall, who is now president of the National Congress of American Indians, said that he grew up believing that the USDA treated his people poorly.

"The first Americans are the last in line when it comes to equality in this country," he said. Despite efforts by Hall and fellow tribe members to wrest change from the USDA before resorting to litigation, all he received, he said, was lip service.

"Nothing was going to change," he said. "It was clear that we had to file a lawsuit."

Asked what he'd like to see out of the litigation, George Keepseagle, the lead plaintiff in the Native Americans' action, said, "We're not asking for more than anybody else. We're just asking to be treated equally."

Harris' e-mail is mailto:aharris@nlj.com