Hettinga v. U.S., 07-5403.

Citation560 F.3d 498
Decision Date03 April 2009
Docket NumberNo. 07-5403.,07-5403.
PartiesHein HETTINGA, et al., Appellants v. UNITED STATES of America, Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (District of Columbia)

Appeal from the United States District Court for the District of Columbia (No. 06cv01637).

Alfred W. Ricciardi argued the cause for appellants. With him on the briefs was John F. Cooney.

Nicholas Bagley, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief were Gregory G. Katsas, Acting Assistant Attorney General, Jeffrey A. Taylor, U.S. Attorney and Michael S. Raab, Attorney. R. Craig Lawrence, Assistant U.S. Attorney, entered an appearance.

Charles M. English Jr. was on the brief for amici curiae Dairy Institute of California, et al. in support of appellee.

Before: ROGERS, TATEL, and KAVANAUGH, Circuit Judges.

Opinion for the Court by Circuit Judge ROGERS.

ROGERS, Circuit Judge:

Hein and Ellen Hettinga, owners of Sarah Farms, and co-owners with their son Gerben of GH Dairy, appeal the dismissal of their complaint challenging the constitutionality of two amendments to the Agricultural Marketing Agreement Act ("AMAA"). The Hettingas alleged that the amendments, which subjected certain large producer-handlers of milk to contribution requirements applicable to milk handlers, were invalid as a bill of attainder and a violation of equal protection and due process. The question on appeal is whether the Hettingas were required to exhaust administrative remedies before filing suit against the United States. We hold that exhaustion was neither jurisdictionally nor prudentially required. The plain text of the exhaustion requirement in the AMAA does not apply to constitutional challenges to the AMAA itself, as distinct from challenges to regulatory orders and attendant obligations. Because the Hettingas' objections do not involve an alleged defect in a marketing order and the Secretary lacks the power to provide a remedy, requiring exhaustion as a prudential matter would not protect administrative agency authority or advance judicial efficiency. Accordingly, we reverse.

I.

The milk business is highly regulated by the Secretary of Agriculture pursuant to the AMAA, 7 U.S.C. §§ 601-674. See Edaleen Dairy, LLC v. Johanns, 467 F.3d 778, 779 (D.C.Cir.2006). The Secretary issues milk marketing orders that regulate payments made from milk handlers (processors and distributors) to milk producers (farmers). Id. In order to protect producers from variations in prices, handlers are required to pay into a pool for milk bought from producers; the funds in the pool are distributed on a pro rata basis to the producers. Id.; Block v. Cmty. Nutrition Inst., 467 U.S. 340, 341-43, 104 S.Ct. 2450 81 L.Ed.2d 270 (1984).

Until 2005, the Secretary had exempted "producer-handlers"—i.e., dairy farms that produce, process, and distribute milk within a single vertically-integrated operation—from the pooling requirements and pricing restrictions of milk marketing orders. See Edaleen Dairy, 467 F.3d at 780. This gave market power to the producer-handlers who could afford to undercut the prices charged by participants in the pooling system, but most producer-handlers were small family operations that had little effect on the market. Id. Some producer-handlers grew quite large, however, and the Secretary initiated a formal rulemaking to determine whether to change the status of producer-handlers in two regions, including the Arizona-Las Vegas marketing area in which Sarah Farms is located. Id. As a result, in 2006 the Secretary promulgated a rule requiring producer-handlers that produced over 3 million pounds of fluid milk per month within a marketing area to pay into the producer settlement fund if they sold milk at a price higher than that paid by handlers to producers. Id.; Milk in the Pacific Northwest and Arizona-Las Vegas Marketing Areas: Order Amending the Orders, 71 Fed.Reg. 9430 (Feb. 24, 2006) (codified at 7 C.F.R. §§ 1124.10, 1124.71, 1131.10, 1131.71).

Sarah Farms is a producer-handler. Its owners, the Hettingas, are also partners with their son, Gerben, in GH Dairy, a handler dairy in Arizona that sells milk exclusively in California. On March 15, 2006, the Hettingas sought an injunction from the district court in the Northern District of Texas against enforcement of the new rule, alleging that it was arbitrary and capricious and that the Secretary lacked authority over producer-handlers that sell only milk produced from their own cows. Another large producer-handler sought an injunction from the district court of the District of Columbia, alleging the Secretary lacked authority to promulgate the rule, and on appeal this court held the producer-handler must first exhaust administrative remedies. Edaleen Dairy, 467 F.3d at 783. Before the Texas district court heard arguments in the Hettingas' case, Congress amended the AMAA.

The Milk Regulatory Equity Act of 2005, Pub.L. No. 109-215, 120 Stat. 328 (2006) (codified at 7 U.S.C. § 608c) ("MREA"), codified the Secretary's revocation of the exemption for large producer-handlers in the Arizona-Las Vegas marketing area, but not the Pacific Northwest area, and also made subject to regulation producers like GH Dairy that are located in the marketing area and sell milk to areas that are unregulated by marketing orders, such as California. 7 U.S.C. § 608c(5)(M), (N), note (2006) ("the Amendments").1 On September 22, 2006, the Hettingas filed a complaint in the district court here alleging that the Amendments are unconstitutional as a bill of attainder and a denial of due process and equal protection because only the Hettingas are subject to them. The district court dismissed the complaint for lack of subject matter jurisdiction upon ruling that "any challenge to the validity of the [Amendments] is essentially a challenge to [an] order by the Secretary," and the Hettingas were therefore required to exhaust administrative remedies. Hettinga v. United States, 518 F.Supp.2d. 58, 61 (D.D.C.2007). The Hettingas appeal, and our review is de novo. Munsell v. Dep't of Agric., 509 F.3d 572, 578 (D.C.Cir.2007).

II.

Parties have long been required to exhaust administrative remedies before seeking relief from federal courts, McCarthy v. Madigan, 503 U.S. 140, 144-45, 112 S.Ct. 1081, 117 L.Ed.2d 291 (1992), either as a matter of congressional command or to protect the authority of the agency and to promote judicial efficiency, id. at 145, 112 S.Ct. 1081. "Where Congress specifically mandates, exhaustion is required. But where Congress has not clearly required exhaustion, sound judicial discretion governs." McCarthy, 503 U.S. at 144, 112 S.Ct. 1081 (1992) (citations omitted). "Whether a statute is intended to preclude initial judicial review is determined from the statute's language, structure, and purpose, its legislative history, and whether the claims can be afforded meaningful review." Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 207, 114 S.Ct. 771, 127 L.Ed.2d 29 (1994) (citation omitted).

Where exhaustion is required, there still is a separate question whether the requirement is jurisdictional, and thus nonwaivable, or non-jurisdictional. In Avocados Plus Inc. v. Veneman, 370 F.3d 1243 (D.C.Cir.2004), this court, in observing that the distinction between jurisdictional and non-jurisdictional exhaustion "is purely a question of statutory interpretation," id. at 1247, set a high bar for determining that a statute requiring exhaustion is jurisdictional: "In order to mandate exhaustion, a statute must contain `"[s]weeping and direct" statutory language indicating that there is no federal jurisdiction prior to exhaustion, or the exhaustion requirement is treated as an element of the underlying claim.'" Id. at 1248 (quoting Weinberger v. Salfi, 422 U.S. 749, 757, 95 S.Ct. 2457, 45 L.Ed.2d 522 (1975)). This court will "presume exhaustion is non-jurisdictional unless Congress states in clear, unequivocal terms that the judiciary is barred from hearing an action until the administrative agency has come to a decision.'" Id. (quoting I.A.M. Nat'l Pension Fund Benefit Plan C v. Stockton Tri Indus., 727 F.2d 1204, 1208 (D.C.Cir.1984)).

Prudential exhaustion, in turn, "serves the twin purposes of protecting administrative agency authority and promoting judicial efficiency." McCarthy, 503 U.S. at 145, 112 S.Ct. 1081. Prudential exhaustion is not required where: (1) it would occasion undue prejudice to subsequent assertion of a court action, for example through excessive delay; (2) an agency may not be empowered to grant relief, for example "because it lacks institutional competence to resolve the particular type of issue presented, such as the constitutionality of a statute" or because "an agency may be competent to adjudicate the issue presented, but still lack authority to grant the type of relief requested"; or (3) the agency is biased. Id. at 146-49, 112 S.Ct. 1081.

A.

Section 608c(15)(A)2 of the AMAA imposes a mandatory administrative exhaustion requirement on milk handlers "seeking to challenge the provisions of a milk marketing order." Edaleen Dairy, 467 F.3d at 782; see Block, 467 U.S. at 343, 104 S.Ct. 2450; United States v. Ruzicka, 329 U.S. 287, 67 S.Ct. 207, 91 L.Ed. 290 (1946). There is no similar requirement for producers because the AMAA affords them no administrative remedy. See Stark v. Wickard, 321 U.S. 288, 309, 64 S.Ct. 559, 88 L.Ed. 733 (1944); see also Ruzicka, 329 U.S. at 295, 67 S.Ct 207. Where a producer-handler sues in its capacity as a handler, as it does in challenging the Secretary's order subjecting it to price-pooling obligations, it must exhaust. Edaleen Dairy, 467 F.3d at 783. Thus, were the Hettingas challenging the Secretary's milk marketing order for the Arizona-Las Vegas area, they would be required to exhaust administrative remedies before filing a lawsuit challenging those orders. Block, 467 U.S. at 346, 104 S.Ct....

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