UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
_________________________________________ ) NICK KORETOFF, d/b/a ) NICK KORETOFF RANCHES, et al., ) ) Plaintiffs, ) ) v. ) Civil Action No. 08-1558 (ESH) ) 1 THOMAS VILSACK, Secretary, ) United States Department of Agriculture, ) ) Defendant. ) _________________________________________ )
MEMORANDUM OPINION
Plaintiff almond growers, handlers, and grower-handlers in the State of California bring
this action pursuant to the Agricultural Marketing Agreement Act of 1937 (“AMAA”), 7 U.S.C.
§ 601 et seq., and the Administrative Procedure Act (“APA”), 5 U.S.C. § 706, against the
Secretary of the United States Department of Agriculture (“USDA”) to challenge a USDA
regulation requiring almond handlers to treat raw almonds in order to reduce the risk of
Salmonella bacteria contamination. This matter is before the Court on defendant’s motion to
dismiss the complaint. For the reasons set forth below, the Court will grant the motion.
BACKGROUND
The AMAA authorizes the Secretary of Agriculture to promulgate marketing orders
designed to establish and maintain orderly marketing conditions for agricultural commodities.
See 7 U.S.C. §§ 602, 608c. Marketing orders regulate the activities of processors, associations of
1 Thomas Vilsack, current Secretary of the United States Department of Agriculture, is substituted for his predecessor, former Secretary Edward Schafer. Fed. R. Civ. P. 25(d). producers, and others engaged in the handling of certain agricultural commodities, known under
the Act as “handlers.” Id. § 608c(1), see also 7 C.F.R. §§ 981.13, 981.16 (defining “handler”
and “to handle” for purposes of the California almond market). They do not regulate farmers in
their capacity as producers (or growers). See id. § 608c(13)(B). The AMAA specifies the terms
and conditions that a marketing order may contain, including provisions “[l]imiting, or providing
methods for the limitation of, the total quantity of any such commodity or product, or of any
grade, size, or quality thereof . . . .” Id. § 608c(6)(A). Before issuing or amending a marketing
order, the Secretary must conduct a formal rulemaking proceeding with prior notice and hearing.
Id. § 608c(3). In addition, before a marketing order or amendment may become effective, its
provisions must be adopted in a marketing agreement by handlers of not less than 50% of the
volume of the commodity covered by the proposed order or amendment and approved by at least
two-thirds of affected growers,2 or it may be adopted by the Secretary without consent of a
handler majority subject to certain findings by the Secretary and grower approval. See id. §§
608c(8), (9).
The almond marketing order, 7 C.F.R. § 981.1 et seq., regulates the handling of almonds
grown in California and is administered locally by the Almond Board of California (the
“Board”), a ten-member board composed of growers and handlers nominated by the industry and
selected by the Secretary. 7 C.F.R. §§ 981.22, 981.30- 981.33. The Board has the power to
“make rules and regulations to effectuate the terms and provisions” of the almond marketing
order, id. § 981.38(b); see also 7 U.S.C. § 608c(7)(C), and “to establish, with the approval of the
Secretary, such minimum quality and inspection requirements . . . as will contribute to orderly
2 In the case of certain citrus fruits, the approval percentages are higher.
-2- marketing or be in the public interest.” 7 C.F.R. § 981.42(b). The administrative rules and
regulations implementing the order are codified at 7 C.F.R. §§ 981.401-981.481.
In August 2006, in response to Salmonella outbreaks in 2001 and 2004 and pursuant to its
authority under the almond marketing order to set outgoing quality control requirements, the
Board recommended a mandatory treatment program to reduce the potential for Salmonella
bacteria in almonds. See Outgoing Quality Control Requirements, 72 Fed. Reg. 15,021, 15,022
(Mar. 30, 2007). Specifically, the Board recommended, with certain exceptions, that handlers
subject their almonds to a process that would achieve a minimum 4-log reduction in Salmonella
bacteria prior to shipment.3 Id. In December 2006, the Secretary published the Board’s
recommendation as a proposed rule, 71 Fed. Reg. 70,683 (proposed Dec. 6, 2006), and following
a 45-day comment period, adopted the final rule without substantial change on March 30, 2007.
72 Fed. Reg. 15,021.
Plaintiffs allege that the almond treatment regulation (1) exceeds the authority granted by
7 C.F.R. § 981.42 to establish quality control requirements; (2) creates a substantive rule adopted
without the use of a formal rulemaking process and grower approval as required by the AMAA
and by USDA Rules of Practice; (3) regulates food safety, an area beyond the limited authority
granted to the Secretary under the AMAA; (4) is arbitrary, capricious, and not in accordance
with law, in violation of the APA; (5) depends upon the lapsed authority of 7 C.F.R. § 981.42
and is therefore void; and (6) improperly regulates the retail market for almonds in violation of
the AMAA. (See Am. Compl. ¶¶ 4-5, 74-93.)
3 A 4-log reduction decreases bacteria by a factor of 10,000. Id. at 15,022.
-3- ANALYSIS
I. The Claims of Almond Handlers Must be Dismissed for Lack of Subject Matter Jurisdiction
Defendant argues that plaintiff almond handlers’ claims must be dismissed for failure to
exhaust their administrative remedies. The AMAA authorizes an aggrieved handler to file a
petition with the Secretary “stating that any [marketing] order or any provision of any such order
or any obligation imposed in connection therewith is not in accordance with law and praying for
a modification thereof or to be exempted therefrom.” 7 U.S.C. § 608c(15)(A). After a hearing,
the Secretary will rule on the petition, which ruling “shall be final, if in accordance with law.”
Id. If unsatisfied with the Secretary’s decision, the handler may seek judicial review in federal
district court. Id. § 608c(15)(B).
These provisions have been interpreted by the Supreme Court to require handlers to
exhaust their administrative remedies prior to seeking judicial review. See United States v.
Ruzicka, 329 U.S. 287, 294 (1946) (“Congress has provided that the remedy in the first instance
must be sought from the Secretary of Agriculture. It is on the basis of his ruling, and of the
elucidation which he would presumably give to his ruling, that resort may be had to the courts.”).
Consistent with Ruzicka, the D.C. Circuit has unequivocally held that “the AMAA’s
administrative appeal process is a mandatory procedure that handlers must follow prior to
seeking judicial review” and from which they “may not be excused from complying.” Edaleen
Dairy, LLC v. Johanns, 467 F.3d 778, 784-85 (D.C. Cir. 2006) (emphasis in original); see also
Block v. Community Nutrition Institute, 467 U.S. 340, 346 (1984) (noting in the context of a
consumer suit that “Section 608c(15) requires handlers first to exhaust the administrative
remedies made available by the Secretary” prior to seeking judicial review); Hershey Foods
Corp. v. Dep’t of Agric., 293 F.3d 520, 526 (D.C. Cir. 2002) (stating that pursuant to § 608c(15),
-4- “the remedy in the first instance must be sought from the Secretary”); Saulsbury Orchards &
Almond Processing, Inc. v. Yeutter, 917 F.2d 1190 (9th Cir. 1990) (affirming dismissal of suit by
almond handlers for failure to exhaust).
Faced with this clear precedent, plaintiffs turn to Avocados Plus, Inc. v. Veneman, 370
F.3d 1243 (D.C. Cir. 2004), which they claim mandates the conclusion that the AMAA’s
exhaustion requirement is nonjurisdictional. In that case, plaintiff importers of avocados and
avocado products sued alleging that the Hass Avocado Promotion, Research, and Information
Act, 7 U.S.C. § 7801 et seq., violated their First Amendment right to be free of compelled
speech. The district court, relying on the Act’s exhaustion requirement, which was virtually
identical to the AMAA’s exhaustion provision, dismissed the complaint because plaintiffs had
not exhausted their administrative remedies. The D.C. Circuit reversed. In doing so, the Court
distinguished between judicially-created nonjurisdictional exhaustion, which may be excused by
a court, and statutorily mandated jurisdictional exhaustion, which cannot be excused. 370 F.3d
at 1247. The Court concluded that the statutory provision at issue did not mandate exhaustion
because it failed to contain “sweeping and direct statutory language indicating that there is no
federal jurisdiction prior to exhaustion.” Id. at 1248 (quoting Weinberger v. Salfi, 422 U.S. 749,
757 (1975)). The Court therefore remanded the case to the district court to determine whether
exhaustion should be excused.
Despite the similarities between the exhaustion provision at issue in Avocados Plus and
the one at issue here, it is Edaleen Dairy that controls this case. In Edaleen Dairy, the D.C.
Circuit specifically rejected plaintiff’s argument that the AMAA exhaustion requirement should
be excused because the issue presented had been “fully framed” in the rulemaking process, the
Secretary’s “full expertise” had already been brought to bear, and it would be “utterly
-5- duplicative” to require administrative review prior to suit. 467 F.3d at 784. The Court
concluded that “[t]here is no need to address these arguments . . . because courts have held on
numerous occasions that the AMAA’s exhaustion requirement is mandatory. Thus, we hold that
Edaleen may not be excused from complying with this requirement.” Id. (emphasis added); see
also Hettinga v. United States, 518 F. Supp. 2d 58, 62 (D.D.C. 2007) (dismissing producer-
handler claims for lack of subject matter jurisdiction based on their failure to exhaust
administrative remedies), appeal docketed, No. 07-5403 (D.C. Cir. Dec. 19, 2007); Nw. Indep.
Producers Ass’n v. Veneman, 312 F. Supp. 2d 23, 25 (D.D.C. 2004) (dismissing handler claims
for same reason). “[A] mandatory [but nonjurisdictional] exhaustion requirement may be
excused in appropriate circumstances, whereas a jurisdictional exhaustion requirement never
may be excused by a court.” Munsell v. USDA, 509 F.3d 572, 579 (D.C. Cir. 2007).4 Thus,
while the Court in Edaleen Dairy did not explicitly state that the exhaustion requirement was
jurisdictional, it did refuse to consider plaintiff’s reasons why exhaustion should be waived,
instead finding that the requirement could not be excused. This Court is bound by Edaleen
Dairy.
Moreover, although the D.C. Circuit in Avocados Plus rejected the argument that Ruzicka
compelled the conclusion in that case that exhaustion was jurisdictional, the Court recognized
that Avocados Plus dealt with a statutory enforcement scheme that “[u]nlike the AMAA . . . does
not provide for comprehensive market regulation that could be disrupted by ill-timed judicial
4 Although Munsell, unlike Avocados Plus, came after Edaleen Dairy, that case did not involve the AMAA, and it is axiomatic that “one panel [of the D.C. Circuit] cannot overrule another.” Brown v. Brody, 199 F.3d 446, 453 (D.C. Cir. 1999) (citation omitted). Likewise, plaintiffs’ reliance on Arbaugh v. Y&H Corp., 546 U.S. 500 (2006), is misplaced, as that case did not discuss the AMAA or make any attempt to distinguish the Supreme Court’s decisions in Ruzicka or Community Nutrition.
-6- interference.” 467 F.3d at 1249. In addition, although the Court also opined that under
precedents more modern than Ruzicka, the AMAA’s exhaustion requirement would be
considered nonjurisdictional, it ultimately relied on the Ruzicka Court’s own limitation of its
holding to “the precise problem before us in relation to the provisions of the particular Act
immediately relevant.” Id. at 1250 (quoting Ruzicka, 329 U.S. at 295). As in Ruzicka, this case
involves the issue of whether handlers under the AMAA must exhaust administrative remedies;
thus, the Supreme Court’s holding in that case controls here.
II. The Claims of Grower-Handlers and Retailers Must be Dismissed for Lack of Subject Matter Jurisdiction
Moreover, grower-handlers and retailers in this case must also exhaust their
administrative remedies prior to bringing suit. Because growers may in some circumstances be
able to seek judicial review without being subject to the exhaustion requirement, the crucial
question with respect to grower-handlers is whether they are bringing suit as growers or as
handlers. Edaleen Dairy, 467 F.3d at 783. Because the almond treatment regulation imposes the
treatment obligation only on handlers, it necessarily follows that plaintiff grower-handlers have
to be suing in their capacity as handlers.5 See id. at 783 (“If a producer-handler asserts an injury
in its capacity as a handler, then it is bound by the administrative exhaustion requirements of the
AMAA.”).
For the same reason, plaintiffs’ retailer claims must also be dismissed for failure to
exhaust. A number of plaintiffs who sell almonds on the retail market claim that the almond
marketing order unlawfully classifies them as handlers. See 7 C.F.R. §§ 981.13, 981.16
(defining terms “handler” and “to handle”); 7 U.S.C. § 608c(13) (prohibiting regulation by 5 While all plaintiffs, whether growers, handlers or both, claim that the almond treatment regulation reduces the marketability of their almonds (see Am. Compl. ¶¶ 31-35), the regulation imposes direct burdens on handlers only.
-7- marketing order of producers in their capacity as producers and, in the case of marketing orders
adopted without the consent of a handler majority, of retailers in their capacity retailers). By
their own admission, however, plaintiffs are only subject to the marketing order because they fit
within the order’s definition of handler. Accordingly, plaintiffs are clearly bringing this
challenge in their capacity as handlers and must therefore first exhaust their administrative
remedies.6 See United States v. Lamars Dairy, Inc., 500 F.2d 84, 85 (7th Cir. 1974) (exhaustion
required where defendants claim to have been incorrectly classified as handlers).
III. The Claims of Growers Must be Dismissed Because They Have No Right to Judicial Review Under the Circumstances of this Case
Defendant also contends that the AMAA by implication “preclude[s] judicial review” of
grower claims, thereby withdrawing a cause of action under the APA, 5 U.S.C. § 701(a)(1).
(Mot. to Dismiss at 6-7.) The Supreme Court’s decision in Block v. Community Nutrition
Institute, 467 U.S. 340 (1984), supports this claim. There, the Court rejected a suit by consumers
challenging milk marketing orders. In doing so, the Court noted that (1) Congress channeled
disputes regarding marketing orders to the Secretary in the first instance because of its belief that
he had the necessary expertise to resolve them; and (2) it would provide handlers with a
convenient way to evade the statutory exhaustion requirement should consumers be permitted to
bring suit. 467 U.S. at 347-48. Therefore, the Court concluded that “Congress intended that
judicial review of market orders issued under the [AMAA] ordinarily be confined to suits
brought by handlers in accordance with 7 U.S.C. § 608c(15).” Id. at 348. Moreover, the Court
held that the presumption favoring judicial review of administrative action had been “overcome
6 Notably, the existing definition of “to handle” was adopted in 1996. See Order Amending Almond Marketing Order, 61 Fed. Reg. 32,917 (June 26, 1996). However, plaintiffs apparently had little concern with the applicability of the definition to their activities prior to the adoption of the almond treatment regulation in 2007.
-8- by inferences of intent drawn from the statutory scheme as a whole.” Id. at 349 (citations
omitted). Specifically, the Court noted that “when a statute provides a detailed mechanism for
judicial consideration of particular issues at the behest of particular persons, judicial review of
those issues at the behest of other persons may be found to be impliedly precluded.”7 Id.; see
also Benson v. Schofield, 236 F.2d 719, 722 (D.C. Cir. 1956) (finding that producers are to be
given no greater status by the AMAA than handlers who must exhaust); Nw. Indep. Producers
Ass’n v. Veneman, 312 F. Supp. 2d 23, 26 (D.D.C. 2004) (“[T]he inclusion of producers in the
administrative process but their exclusion from the provisions enabling judicial review is the
type of omissions that indicate a specific Congressional intent to omit.”). The Court’s statements
apply equally to growers. Should they be allowed to bring a direct action in federal court,
handlers could easily circumvent the mandatory exhaustion requirement merely by finding a
grower who would be willing to join in or initiate suit.
Nevertheless, while growers normally have no right to sue, the Supreme Court has
recognized a narrow exception to this rule. In Stark v. Wickard, 321 U.S. 288 (1944), the Court
held that milk producers had standing to challenge certain deductions by the Secretary from the
producer settlement fund. Because producers were guaranteed by statute and by marketing order
minimum prices and the “challenged deduction[s] reduce[d] pro tanto the amount actually
received by the producers for their milk,” the Court found that the producers were alleging injury
to their “definite personal rights” that were “not possessed by the people generally.” Id. at 302,
304, 309. Therefore, the producers had standing to object to the administration of the settlement
fund. Moreover, no other forum existed to challenge the Secretary’s actions since handlers, who 7 For this reason, plaintiffs’ reliance (see Opp’n at 13) on Aid Ass’n for Lutherans v. U.S. Postal Service, 321 F.3d 1166 (D.C. Cir. 2003), a case that did not involve the AMAA, for the proposition that a strong presumption exists in favor of judicial review under the APA is misplaced.
-9- had no financial interest in the fund or its use, had no standing to sue. Id. at 308. Thus, the
Court concluded that the statutory scheme as a whole implicitly authorized producer suits to
enforce these rights. See id. at 306-09; see also Edaleen Dairy, LLC v. Johanns, 467 F.3d 778,
783 (D.C. Cir. 2006) (noting that Stark turned on “two key factors:” that producers (1) were not
merely objecting to a regulation, but were suing to protect their definite personal rights and (2)
did not have access to an administrative remedy).
In this case, grower plaintiffs challenge the USDA’s authority to mandate treatment of
almonds. In doing so, their fundamental concern is with the impact of the treatment regulation
on their ability to sell their almonds in a niche organic market at a premium. (See Am. Compl.
¶¶ 29-33.) Thus, plaintiffs are merely objecting to a regulation rather than asserting a definite
personal right granted by the AMAA.8 In Stark, the Supreme Court specifically recognized that
not every loss would qualify as a deprivation of a definite personal right of the producer. As the
Court noted, “[t]he petitioners’ complaint is not that their blended price [i.e., the uniform
minimum price less administrative deductions] is too low, but that the blended price has been
reduced by a misapplication of money deducted from the producers’ minimum price.” 321 U.S.
at 308-09; see also Benson v. Schofield, 236 F.2d 719, 722 (D.C. Cir. 1956) (“[A]ppellees to
have standing in court, must show an injury or threat to a particular right of their own . . . . Mere
loss of income in consequence of the action of Government or economic disadvantage, by itself,
constitutes damnum absque injuria which does not confer standing.” (citation and internal
quotation marks omitted)); Ark. Dairy Coop., Inc. v. USDA, 576 F. Supp. 2d 147, 155-56 8 As defendant points out, plaintiffs’ claim (Opp’n at 8) that they have a definite personal right to “approve or veto marketing order provisions” is, in reality, a challenge to the Secretary’s authority to issue the treatment regulation as an administrative regulation rather than as an amendment to the almond marketing order, which would trigger the AMAA’s producer approval and public hearing requirements. (Reply at 11-12.) This challenge is not a uniquely producer claim.
- 10 - (D.D.C. 2008) (holding that producers challenging an order that reduced the minimum prices
dairy farmers receive under milk marketing orders were objecting to a regulation rather than
asserting a definite personal right and therefore lacked standing), appeal docketed, No. 08-5406
(D.C. Cir. Sept. 19, 2008).
Moreover, unlike Stark, an administrative remedy exists in this case since handlers can be
expected to challenge the allegedly unlawful agency action. Handlers, like growers, have an
interest in receiving the highest price for their almonds.9 In fact, the almond treatment
regulation, which plaintiffs allege is costly and lowers the value of their almonds in the organic
market (see Am. Compl. ¶¶ 29-35), imposes direct costs only on handlers. “[T]he very presence
of handlers as plaintiffs in the suit leads inexorably to the conclusion that a suit by a producer is
not necessary to ‘ensure the statute’s objectives will not be frustrated.’” Nw. Indep. Producers
Ass’n, 312 F. Supp. 2d at 27 (citing Community Nutrition, 467 U.S. at 352).
CONCLUSION
For the foregoing reasons, defendant’s motion to dismiss will be granted. A separate
order accompanies this Memorandum Opinion.
/s/ ELLEN SEGAL HUVELLE United States District Judge
Date: March 9, 2009
9 While, as plaintiffs assert, handler and grower interests can sometimes be antagonistic (see Opp’n at 32) since handlers have an interest in paying the lowest price possible for almonds, both handlers and growers have the same interest in selling at the highest price.
- 11 -