Humane Soc'y of the U.S. v. Vilsack

• Decision Date: 14 August 2015
• Docket Number: 13–5307.,Nos. 13–5293,s. 13–5293
• Citation: 797 F.3d 4
• Parties: HUMANE SOCIETY OF THE UNITED STATES, Appellant Harvey Dillenburg and Iowa Citizens for Community Improvement, Appellees v. Thomas J. VILSACK, Secretary of the U.S. Department of Agriculture, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

797 F.3d 4

HUMANE SOCIETY OF THE UNITED STATES, AppellantHarvey Dillenburg and Iowa Citizens for Community Improvement, Appellees

v.Thomas J. VILSACK, Secretary of the U.S. Department of Agriculture, Appellee.

Nos. 13–5293

13–5307.

United States Court of Appeals, District of Columbia Circuit.

Argued May 7, 2015.

Decided Aug. 14, 2015.

Matthew E. Penzer argued the cause for appellants. With him on the briefs was Jonathan R. Lovvorn. Ralph E. Henry entered an appearance.

Abby C. Wright, Attorney, U.S. Department of Justice. argued the cause for appellee. With her on the brief were Ronald C. Machen Jr., U.S. Attorney at the time the brief was filed, and Scott R. McIntosh, Attorney.

Before: GRIFFITH, SRINIVASAN and PILLARD, Circuit Judges.

Opinion for the Court filed by Circuit Judge PILLARD.

PILLARD, Circuit Judge:

The plaintiffs, a pork producer named Harvey Dillenburg and two animal welfare organizations who count pork producers among their members, claim that the National Pork Board has misappropriated millions of dollars from a fund for pork promotion into which pork producers are required to pay. The plaintiffs filed suit in federal district court and the court dismissed their claim for a lack of standing. We reverse.

I.

The National Pork Board is a quasi-governmental entity responsible for administering a federal regulatory scheme known as the "Pork Order." See 7 U.S.C. § 4808 ; see also 7 C.F.R. Part 1230. The Order implements the Pork Act, 7 U.S.C. §§ 4801 – 19, the purpose of which is to promote pork in the marketplace, see 7 U.S.C. § 4801(b)(1). The Board strengthens, maintains, develops, and expands markets for pork and pork products through research and consumer information campaigns. In exchange for the Board's efforts on behalf of their industry, pork producers pay the Board a special assessment on each hog they import or sell. See 7 C.F.R. § 1230. 71(b).

In 2006, the Board, with the approval of the Secretary of the Department of Agriculture, bought four trademarks associated with the slogan Pork: The Other White Meat (hereinafter "the slogan" or "the mark") from the National Pork Producers Council, an industry trade group, for $60 million.¹ The payment terms provide that the Board will pay the Council $3 million annually for twenty years. The Board can terminate the payments at any time with one year's notice, in which case ownership of the phrase reverts back to the Council. Five years after buying the mark, the Board replaced it with a new motto, Pork: Be Inspired. Now the Board keeps the initial slogan around as a "heritage brand" that it does not feature in its advertising.

The plaintiffs claim that the Board did not buy the slogan for its value as a marketing tool. They allege that the Board used the purchase of the slogan as a means to cut a sweetheart deal with the Council to keep the Council in business and support its lobbying efforts. They maintain that the Board overpaid for the slogan and that the Board's shift to the Pork: Be Inspired campaign makes the initial slogan all but worthless. According to the plaintiffs, the purchase of the mark and continued payment for it was and is arbitrary and capricious. The plaintiffs also argue that the Board's purchase of the slogan with the purpose of supporting the Council's lobbying efforts violates the Pork Act and Order's prohibitions against the Board spending funds to influence legislation. See 7 U.S.C. § 4809(e) ; 7 C.F.R. § 1230.74.

The plaintiffs sued the Secretary of the Department of Agriculture under the Administrative Procedure Act seeking an order enjoining the Board's further payments to the Council and directing the Secretary to claw back what payments he can from the deal. The district court dismissed the plaintiffs' suit for lack of Article III standing. See Humane Soc'y v. Vilsack, 19 F.Supp.3d 24, 29 (D.D.C.2013). The court held that Dillenburg failed to establish an injury in fact fairly traceable to the Board's actions that is likely to be redressed by a favorable decision. Id. at 34–42. It also held that the two plaintiff organizations could not establish standing to sue in their own right or on behalf of their pork-producing members. Id. at 42–47. The plaintiffs appealed via separate notices and we consolidated the cases for review.

For the reasons that follow, we reverse and remand. This case involves a concrete and particularized harm caused by an agency's failure to confer a direct economic benefit on a statutory beneficiary. We also reject the government's argument that the plaintiffs have failed to exhaust their administrative remedies. The statute's provision for administrative review would not offer the plaintiffs adequate relief and therefore they were not required to pursue it.

II.

This suit ended on a motion to dismiss. We review such dismissals de novo. Mendoza v. Perez, 754 F.3d 1002, 1010 (D.C.Cir.2014). To survive a motion to dismiss for lack of standing, a complaint must state a plausible claim that the plaintiff has suffered an injury in fact fairly traceable to the actions of the defendant that is likely to be redressed by a favorable decision on the merits. See Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ; see also Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Determining a claim's plausibility is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679, 129 S.Ct. 1937. We accept facts alleged in the complaint as true and draw all reasonable inferences from those facts in the plaintiffs' favor. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556–57, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

A.

Dillenburg has made out a plausible claim to Article III standing. His argument is simple. He says that his return on his investment has been diminished by the Board's unlawful payments of $3 million per year for Pork: The Other White Meat. If the Board stopped paying for the slogan, recouped funds unlawfully channeled to the Council, and devoted the money saved to more effective pork promotions, Dillenburg's alleged harm would be at least partially redressed. Amend. Compl. ¶¶ 15, 128, J.A. 11, 34. That claim, if supported by sufficient factual allegations to "nudge [it] ... from conceivable to plausible," Twombly, 550 U.S. at 570, 127 S.Ct. 1955, is sufficient to establish Article III standing. Dillenburg's claim readily clears that line.

As an initial matter, Dillenburg has alleged a "concrete and particularized" injury. Lujan, 504 U.S. at 560, 112 S.Ct. 2130. He has alleged facts plausibly showing that the mark was worth less than its $60 million purchase price. Between 2001 and 2004, the Board paid the Council one dollar per year to license the slogan. Amend. Compl. ¶ 59, J.A. 20. In 2004, the Board negotiated a new five-year license with the Council, providing that payments would increase from one dollar per year to $818,000 for three years before reverting back to one dollar per year for the final two years. Id. ¶¶ 63, 109, J.A. 21–22, 30–31. The plaintiffs allege that the Board's CEO wrote that the increased license fee was negotiated to "allow the [Council] to get the money they need for the next four years." Id. ¶ 63, J.A. 21–22. Before the Board entered the new licensing agreement, the Board's own economist recommended that the Board pay no more than $375,000 annually to license the mark. Id. ¶ 64, J.A. 22. He also advised the Board that it was in a powerful position to dictate favorable terms to the Council because there would be few other buyers willing to purchase a generic slogan closely identified with the promotion of pork. Id. ¶ 83, J.A. 25–26. Indeed, there were no competing offers to purchase the slogan. Id. ¶ 84, J.A. 26. Those facts raise a plausible inference that the slogan was not worth its purchase price at the time, and is not worth $3 million per year now.

Dillenburg also alleged facts tending to show that the Board's purchase of the mark was not negotiated at arm's length, which increased the plausibility of allegations that the Board paid too much. According to the complaint, the Council and the Board have been intertwined intimately since the Board's formation in the mid–1980s. Id. ¶¶ 43–45, 55, J.A. 17, 19–20. The Council lobbied for passage of the Pork Act, and it proposed the text that ultimately served as the foundation for the Pork Order. Id. ¶¶ 43, 45, J.A. 17. The Council played an instrumental role in developing the slogan, vetting possible promotions for the Board to undertake, and engaging with advertising agencies to develop them. Id. ¶¶ 46–54, J.A. 18–19. Even though the Board paid for the mark's development, the Council registered the mark in its own name and as its sole owner. Id. ¶¶ 52–53, J.A. 19. The Board and the Council were so enmeshed that, in 1986 when the Board voted to adopt the campaign and so committed itself to spend tens of millions of dollars in assessment funds over two decades on the promotion, it did not execute any licensing agreement or fee contract to formalize that arrangement. Id. ¶ 51, J.A. 19. The Department of Agriculture's Office of Inspector General concluded in a 1999 audit that the Board had "relinquished too much authority to its primary contractor, the [Council], and ha[d] placed the [Council] in a position to exert undue influence over Board budgets and grant proposals." Id. ¶ 55, J.A. 19–20. That history, as alleged, raises a plausible inference that the Board's purchase was not the product of arm's-length negotiation.

Dillenburg has also alleged facts plausibly showing that, whatever its value when the Board purchased it, the mark is no longer worth $3 million per year. In 2011, the Board replaced the slogan with a "proud new brand identity"—Pork: Be Inspired. Id. ¶ 100, J.A. 28. In the same press release in which it announced that it would be adopting Pork: Be Inspired, the Board stated that the...