Avocados Plus Inc. v. Veneman

• Citation: 370 F.3d 1243
• Decision Date: 18 June 2004
• Docket Number: No. 03-5086.,03-5086.
• Parties: AVOCADOS PLUS INCORPORATED, et al., Appellants, v. Ann M. VENEMAN, in her official capacity as Secretary of the United States Department of Agriculture, et al., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

370 F.3d 1243

AVOCADOS PLUS INCORPORATED, et al., Appellants, v. Ann M. VENEMAN, in her official capacity as Secretary of the United States Department of Agriculture, et al., Appellees.

No. 03-5086.

United States Court of Appeals, District of Columbia Circuit.

Argued May 13, 2004.

Decided June 18, 2004.

COPYRIGHT MATERIAL OMITTED

Appeal from the United States District Court for the District of Columbia (02cv01798).

Dale E. McNiel argued the cause for appellants. With him on the briefs was Tracey M. Price.

Julie M. Carpenter was on the brief for amicus curiae DKT Liberty Project in support of reversal.

August E. Flentje, Attorney, U.S. Department of Justice, argued the cause for federal appellees. With him on the brief were Peter D. Keisler, Assistant Attorney General, Roscoe C. Howard, Jr., U.S. Attorney, and Douglas N. Letter, Counsel.

Richard T. Rossier was on the brief for appellees Charlie Wolk, et al.

Before: EDWARDS, RANDOLPH, and TATEL, Circuit Judges.

Opinion for the Court filed by Circuit Judge RANDOLPH.

RANDOLPH, Circuit Judge:

The Hass Avocado Promotion, Research, and Information Act, 7 U.S.C. §§ 7801-7813, authorizes the Department of Agriculture to collect assessments from avocado growers and importers and to transfer the assessments to a board charged with promoting domestic consumption of avocados of the Hass variety. Two importers of avocados and two importers of avocado products sued in district court alleging that the Act violated their First Amendment right to be free of compelled speech.¹ The district court dismissed the complaint because the importers had not exhausted the administrative remedies the Act provides.

I.

The Avocado Act, one of more than a dozen federal statutes aimed at promoting the sale of various agricultural commodities, requires the Secretary of Agriculture to issue an implementing order that takes effect if the majority of affected growers and importers approve it in a referendum. § 7805. The order establishes a Hass Avocado Board consisting of industry representatives. § 7804. The function of the Board is to "administer the order," § 7804(c)(1), "develop budgets for the implementation of the order," § 7804(c)(5), and "develop" and "implement plans and projects for Hass avocado promotion, industry information, consumer information, or related research[.]" § 7804(c)(5)-(6). The Board may not implement any budget, plan or project without the prior approval of the Secretary, but these are "deemed to be approved" if the Secretary does not act within 45 days. § 7804(d)(3).

The Act also requires the Secretary to impose assessments on growers and importers to pay for the Board's activities. § 7804(h). The Board must pay 85 percent of a grower's assessments to its state grower organization, if such an organization exists. § 7804(h)(8). If an importer belongs to an importers' association, the Board must pay 85 percent of its assessment to that group. § 7804(h)(9). The Board must also reimburse the Secretary for expenses incurred conducting the referendum and supervising the Board. § 7804(i). The rest of the money pays for Board programs, although at least some of it must fund a promotion program conducted by the California Avocado Commission. See § 7804(e)(1) (requiring Board to enter contract with "avocado organization ... in a State with the majority of Hass avocado production in the United States"); § 7801(a)(2) (stating that "virtually all domestically produced avocados for the commercial market are grown in the State of California").

Under the § 7806 of the Act, any "person subject to an order" may file a petition with the Secretary "stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with the law; and ... requesting a modification of the order or an exemption from the order." § 7806(a)(1). The Secretary must rule on the petition after a hearing. § 7806(a)(3). The Act further provides that the "district courts of the United States ... shall have jurisdiction to review the ruling of the Secretary on the petition[,]" § 7806(b)(1), and must remand it if it "is not in accordance with law[.]" § 7806(b)(3).

Rather than invoking § 7806, the importers filed a complaint in district court claiming that the mandatory assessments were unconstitutional and seeking an injunction against enforcement of the Act.² The importers relied principally on United States v. United Foods, Inc., 533 U.S. 405, 121 S.Ct. 2334, 150 L.Ed.2d 438 (2001), in which the Supreme Court ruled that an identical provision in the Mushroom Promotion, Research, and Consumer Information Act, 7 U.S.C. §§ 6101-6112, violated the free speech rights of mushroom growers by forcing them to pay for speech with which they disagreed.

The government had argued in United Foods that the mushroom promotion program was government speech, and that the government therefore could force growers to pay for it. The Supreme Court refused to consider the argument because the government had not raised it in the court of appeals. 533 U.S. at 416-17, 121 S.Ct. at 2340-41. United Foods triggered a series of challenges against other agricultural commodity promotion programs. In each case the government relied on the government speech defense and in each case the court of appeals rejected it. See Cochran v. Veneman, 359 F.3d 263 (3d Cir.2004) (dairy); Michigan Pork Producers Ass'n v. Veneman, 348 F.3d 157 (6th Cir.2003) (pork); Livestock Mktg. Ass'n v. USDA, 335 F.3d 711 (8th Cir.2003), cert. granted, 2004 WL 303634 (May 24, 2004) (beef); see also Pelts & Skins, LLC v. Landreneau, 365 F.3d 423 (5th Cir.2004) (striking down state alligator products promotion program); but see Charter v. USDA, 230 F.Supp.2d 1121 (D.Mont.2002) (sustaining beef program as government speech).

The avocado importers moved for a preliminary injunction. The government opposed the motion, arguing that the avocado program was government speech. The government also moved to dismiss the complaint for failure to exhaust administrative remedies. The district court initially addressed the importers' First Amendment claims, holding that they were not required to exhaust the administrative remedy provided in § 7806. Then, in response to a government motion, the court reconsidered its decision, ruled that importers must exhaust their administrative remedy, and dismissed the complaint for lack of subject matter jurisdiction.

II.

The word "exhaustion" now describes two distinct legal concepts. The first is a judicially created doctrine requiring parties who seek to challenge agency action to exhaust available administrative remedies before bringing their case to court. See generally 2 RICHARD J. PIERCE, JR., ADMINISTRATIVE LAW TREATISE § 15.2 (4th ed.2002). We will call this doctrine "non-jurisdictional exhaustion." Non-jurisdictional exhaustion serves three functions: "giving agencies the opportunity to correct their own errors, affording parties and courts the benefits of agencies' expertise, [and] compiling a record adequate for judicial review[.]" Marine Mammal Conservancy, Inc. v. Dep't of Agric., 134 F.3d 409 (D.C.Cir.1998); McCarthy v. Madigan, 503 U.S. 140, 145-46, 112 S.Ct. 1081, 1086-87, 117 L.Ed.2d 291 (1992).

Occasionally, exhaustion will not fulfill these ends. There may be no facts in dispute, see McKart v. United States, 395 U.S. 185, 198 n. 15, 89 S.Ct. 1657, 1665 n. 15, 23 L.Ed.2d 194 (1969), the disputed issue may be outside the agency's expertise, see id. at 197-98, 89 S.Ct. at 1660-61, or the agency may not have the authority to change its decision in a way that would satisfy the challenger's objections, see McCarthy, 503 U.S. at 147-48, 112 S.Ct. at 1087-88. Also, requiring resort to the administrative process may prejudice the litigants' court action, see id. at 146-47, 112 S.Ct. at 1086-87, or may be inadequate because of agency bias, see id. at 148-49, 112 S.Ct. at 1088. In these circumstances, the district court may, in its discretion, excuse exhaustion if "the litigant's interests in immediate judicial review outweigh the government's interests in the efficiency or administrative autonomy that the exhaustion doctrine is designed to further." Id. at 146, 112 S.Ct. at 1086 (quoting West v. Bergland, 611 F.2d 710, 715 (8th Cir.1979)).

The second form of exhaustion arises when Congress requires resort to the administrative process as a predicate to judicial review. This "jurisdictional exhaustion" is rooted, not in prudential principles, but in Congress' power to control the jurisdiction of the federal courts. See EEOC v. Lutheran Soc. Servs., 186 F.3d 959, 963-64 (D.C.Cir.1999). Whether a statute requires exhaustion is purely a question of statutory interpretation. See McCarthy, 503 U.S. at 144, 112 S.Ct. at 1085. If the statute does mandate exhaustion, a court cannot excuse it. See Shalala v. Illinois Council on Long Term Care, 529 U.S. 1, 13, 120 S.Ct. 1084, 1093, 146 L.Ed.2d 1 (2000).³

While the existence of an administrative remedy automatically triggers a non-jurisdictional exhaustion inquiry, jurisdictional exhaustion requires much more. 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." Weinberger v. Salfi, 422 U.S. 749, 757, 95 S.Ct. 2457, 2462, 45 L.Ed.2d 522 (1975); 2 PIERCE, ADMINISTRATIVE LAW TREATISE § 15.3, at 986. We 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," I.A.M. Nat'l Pension Fund Benefit Plan C v. Stockton Tri Indus., 727 F.2d 1204, 1208 (D.C.Cir.1984).

For example, the Supreme Court decided that the Social Security Act mandated exhaustion in light of this statutory language: "No...