Doing Bus. As Nick Koretoff Ranches v. Vilsack

• Decision Date: 03 August 2010
• Docket Number: No. 09-5286.,09-5286.
• Citation: 614 F.3d 532
• Parties: Nick KORETOFF, doing business as Nick Koretoff Ranches, et al., Appellants v. Tom VILSACK, United States Secretary of Agriculture, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

614 F.3d 532

Nick KORETOFF, doing business as Nick Koretoff Ranches, et al., Appellants

v.Tom VILSACK, United States Secretary of Agriculture, Appellee.

No. 09-5286.

United States Court of Appeals,District of Columbia Circuit.

Argued April 22, 2010.

Decided Aug. 3, 2010.

Appeal from the United States District Court for the District of Columbia (No. 1:08-cv-01558-ESH).

John H. Vetne argued the cause for appellants. With him on the briefs were Susan Silber and Kenneth Sigman.

Michael P. Abate, Attorney, U.S. Department of Justice, argued the cause for appellee. With him on the brief were Tony West, Assistant Attorney General, Channing D. Phillips, Acting United States Attorney, and Michael S. Raab, Attorney.

Before: HENDERSON, GRIFFITH, and KAVANAUGH, Circuit Judges.

Opinion for the Court filed by Circuit Judge KAVANAUGH, with whom Circuit Judge GRIFFITH joins.

Opinion dissenting in part filed by Circuit Judge HENDERSON.

KAVANAUGH, Circuit Judge:

A 2007 Department of Agriculture rule mandates that almonds produced in the United States be pasteurized or chemically treated to prevent salmonella outbreaks. That requirement largely eliminates the ability of California almond producers to sell raw almonds-and therefore harms those producers' economic well-being. At the same time, because of what the California producers view as a statutory loophole, foreign almond producers are still able to sell raw almonds in the United States. Several California almond producers filed suit. They argue that the 2007 rule is arbitrary and capricious under the Administrative Procedure Act, exceeds the agency's statutory authority, and violates various APA procedural requirements.

The Government responds not on the merits, but by contending that the California producers should not even be allowed into court to advance their claims. The Government does not deny that the producers suffered an injury-in-fact and have standing under Article III of the Constitution. Rather, according to the Government, the Agricultural Marketing Agreement Act of 1937 precludes almond producers from obtaining judicial review of the 2007 rule. We disagree with the Government. The AMAA does not expressly bar producers' suits. And in light of the decisions of the Supreme Court and this Court, we conclude that the AMAA does not implicitly bar the producers' claims. See Block v. Community Nutrition Institute, 467 U.S. 340, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984); Stark v. Wickard, 321 U.S. 288, 64 S.Ct. 559, 88 L.Ed. 733 (1944); Arkansas Dairy Cooperative Association v. U.S. Department of Agriculture, 573 F.3d 815 (D.C.Cir.2009). We therefore reverse the contrary judgment of the District Court, which was issued before and thus without the benefit of our recent on-point decision in Arkansas Dairy.

Three of the 10 California almond producers involved in this appeal are also retailers who sell their own almonds directly to consumers. Those three plaintiffs mount an additional legal challenge to separate Department of Agriculture regulations that restrict retail sales by such producers. We agree with the District Court that the AMAA does not preclude plaintiffs from raising such claims but does require plaintiffs to exhaust their administrative remedies with the Department of Agriculture before bringing the claims to court. We therefore affirm the District Court's judgment as to those claims.

I

A

This case is about the almond market. That market consists of growers (whom we will refer to as “producers”), handlers, retailers, and consumers of almonds. Producers grow the almonds and sell them to handlers. Handlers buy the almonds from the producers, process and package the almonds, and then sell them to retailers. Retailers sell almonds to consumers. Some producers also sell directly to consumers, bypassing the intermediaries.

This case involves the Agricultural Marketing Agreement Act of 1937, a landmark piece of legislation that arose out of the farming catastrophe during the Great Depression. The AMAA authorizes the Secretary of Agriculture to promulgate marketing orders that regulate the production and sale of agricultural commodities. 7 U.S.C. §§ 601-674. It seeks to “avoid unreasonable fluctuations in supplies and prices” of various farm commodities. Id. § 602(4). The AMAA is currently applied to about three dozen agricultural commodities, such as milk, avocados, oranges, and peanuts. Agricultural marketing orders may dictate the “total quantity” of a regulated commodity sold in a particular region, as well as the “grade, size, or quality thereof.” Id. § 608c(6)(A).

Before promulgating a marketing order under the AMAA, the Secretary of Agriculture must consult with producers and handlers of the commodity in question. The AMAA requires that a marketing order receive the approval of two-thirds of producers in a region (measured by number of producers or volume). For some purposes, the AMAA also requires the approval of a majority of handlers (measured by volume). Id. § 608c(8)-(9).

The AMAA expressly allows handlers to sue and obtain judicial review of marketing orders, but requires them first to exhaust specified administrative remedies. Id. at § 608c(15)(A). The AMAA is silent about a right to sue or about exhaustion of administrative remedies for producers, retailers, or consumers.

B

In 1950, acting pursuant to the AMAA, the Secretary of Agriculture promulgated the California Almond Marketing Order, 7 C.F.R. pt. 981. The Almond Order has been amended often in the 60 years since. Among other things, the Order sets quality standards for commercially sold almonds and regulates the quantity of almonds that may be sold in a given year.

In the wake of two salmonella outbreaks in 2001 and 2004, the Secretary in 2007 issued a new almond rule under the Almond Order. Almonds Grown in California; Outgoing Quality Control Requirements, 72 Fed.Reg. 15,021, 15,034 (Mar. 30, 2007). This rule is now codified at 7 C.F.R. § 981.442(b).

The new rule required the use of one of several approved methods for reducing salmonella bacteria in almonds, all involving either pasteurization or chemical treatment of nearly all almonds sold. 7 C.F.R. § 981.442(b).

C

The current dispute arises primarily because the 2007 rule had the effect of largely eliminating the domestic raw almond market. The 10 plaintiffs still involved in the case are California almond producers who grew raw almonds for domestic U.S. consumption. Because the 2007 rule devastated the market for domestic raw almonds, those producers allege that they lost both their expected profits from the premium price paid for raw almonds and the return on investments they had made in production equipment. At the same time, the 2007 rule had no impact on foreign almond producers, who are not subject to Department of Agriculture regulation and are still permitted to import raw almonds into the United States.

Three of the 10 producers are also retailers who sell almonds directly to consumers. These producer-retailers also challenged separate Department of Agriculture restrictions on how and where they could sell almonds at retail. Those restrictions date back to 1985. See 50 Fed.Reg. 30,264 (July 25, 1985) (codified at 7 C.F.R. § 981.413).

A group of California almond producers sued in U.S. District Court, arguing that various aspects of the Secretary's 2007 rule were arbitrary and capricious under the APA, exceeded statutory authority, and violated certain APA procedural requirements. The District Court dismissed plaintiffs' suit. See Koretoff v. Vilsack, 601 F.Supp.2d 238 (D.D.C.2009). It reasoned that the AMAA implicitly precludes producers from suing to challenge regulations issued under the AMAA. The Court ruled that the separate claims by the producer-retailers were not precluded but should be dismissed for failure to exhaust administrative remedies. See id. at 241-44.

Plaintiffs appeal on both issues. Our review of the legal questions is de novo. In resolving the question of AMAA preclusion, it bears mention that the District Court rendered its decision before Arkansas Dairy Cooperative Association v. U.S. Department of Agriculture, 573 F.3d 815 (D.C.Cir.2009), a recent opinion of this Court that helps chart our path here.

II

A

The Administrative Procedure Act establishes a cause of action for those “suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action.” 5 U.S.C. § 702; see Abbott Labs. v. Gardner, 387 U.S. 136, 140, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). That statutory right to judicial review does not apply, however, when “statutes preclude judicial review.” 5 U.S.C. § 701(a)(1). Whether a statute precludes judicial review of agency action, the Supreme Court has said, is a question of congressional intent, which is determined from the statute's “express language,” as well as “from the structure of the statutory scheme, its objectives, its legislative history, and the nature of the administrative action involved.” Block v. Community Nutrition Inst., 467 U.S. 340, 345, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984); see also Free Enter. Fund v. Public Co. Accounting Oversight Bd., --- U.S. ----, ----, 130 S.Ct. 3138, 3150, 177 L.Ed.2d 706 (2010); Thunder Basin Coal Co. v. Reich, 510 U.S. 200, 207, 114 S.Ct. 771, 127 L.Ed.2d 29 (1994).

In assessing whether a plaintiff's suit is precluded by statute, we must determine not only whether “Congress precluded all judicial review” of the agency action but also whether Congress “foreclosed review to the class to which the [plaintiff] belong[s].” Block, 467 U.S. at 345-46, 104 S.Ct. 2450 ( quoting Barlow v. Collins, 397 U.S. 159, 173, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970) (Brennan, J., concurring in result and dissenting)).

B

The Supreme Court and this Court have applied those preclusion principles in three important cases arising under the Agricultural Marketing Agreement Act: Stark v. Wickard, 321 U.S. 288, 64 S.Ct. 559, 88 L.Ed....