Rasmussen v. Hardin

• Decision Date: 29 March 1972
• Docket Number: 25669.,No. 25668,25668
• Parties: William J. RASMUSSEN, etc., Plaintiff-Appellant, v. Clifford HARDIN, Secretary of Agriculture of the United States, Defendant-Appellee. Marlene L. KRESSE et al., Plaintiff-Appellants, v. Clifford HARDIN, Secretary of Agriculture of the United States, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

461 F.2d 595 (1972)

William J. RASMUSSEN, etc., Plaintiff-Appellant, v. Clifford HARDIN, Secretary of Agriculture of the United States, Defendant-Appellee.

Marlene L. KRESSE et al., Plaintiff-Appellants, v. Clifford HARDIN, Secretary of Agriculture of the United States, Defendant-Appellee.

Nos. 25668, 25669.

United States Court of Appeals, Ninth Circuit.

March 29, 1972.

John B. Carroll (argued), of Nottingham, Carroll, Paltz, Coughlin & Conan, Syracuse, N. Y., Stockton & Hing, Hill & Savoy, Phoenix, Ariz., for appellants.

William D. Appler (argued), Alan S. Rosenthal, William D. Ruckelshaus, Asst. Atty. Gen., Washington, D. C., Richard K. Burke, U. S. Atty., Richard C. Gormley, Asst. U. S. Atty., Phoenix, Ariz., for appellee.

Before MADDEN, Judge, United States Court of Claims^*, BROWNING and DUNIWAY, Circuit Judges.

DUNIWAY, Circuit Judge:

These are appeals by the plaintiffs from orders dismissing two actions challenging the validity of certain provisions of a milk marketing order promulgated by the defendant Secretary of Agriculture. We affirm in both cases.

1. Nature of the cases.

The complaints are identical in the two cases except for the parties plaintiff. In No. 25,668 the plaintiff Rasmussen is a milk producer and handler who also makes and sells a milk product called "Go." In No. 25,669, the plaintiffs Kresse, et al., are consumers of "Go," and all but two of them are members of Concerned Consumers, an unincorporated association.

The complaints assert a common law right to be free from unlawful regulation by the Secretary. They also alleged that the Secretary violated the appellants' Fifth Amendment right to due process by holding hearings concerning the milk order in a location some 1,500 miles from appellants' residence. Finally, they allege that by attempting to regulate the milk product marketed by Rasmussen, the Secretary exceeded his statutory authority and imposed an unlawful burden on consumers.

The cases arise from orders issued by the Secretary under the Agricultural Marketing Agreement Act, 7 U.S.C. § 601 ff., and particularly § 608c. Rasmussen is an operator of a dairy in the central Arizona marketing area. As a producer-handler, handling milk produced by him, he has been exempt from the pooling and pricing provisions of the Secretary's marketing order for the area, 7 C.F.R. § 1131.11. In 1965, he began to make and market "Go" from powdered skim milk and other ingredients, which he brought to Arizona from outside the state. All that he adds that is not so imported is local water. He sold "Go" in competition with fresh milk, and at a lower price. By 1969 about 17.1% of his milk distribution was "Go".

Since 1964, marketing orders have required that a regulated handler who buys milk powder and converts it into fluid skim milk must account for it at the higher Class I price (29 F.R. 9002). In 1964, the Secretary held national hearings on the question of requiring handlers who reconstitute dry milk powder into skim milk drinks, including drinks which had various substances added to flavor or fortify them, to account for the milk powder at Class I rather than surplus prices. 29 F.R. 9002, 9010. The Secretary concluded they should, and the marketing orders, including the Central Arizona Order, were amended to reflect this. 29 F.R. 9284. However, Rasmussen as a producer-handler was not affected.

On December 14, 1966, and thereafter, the Secretary gave notice of public hearings to consider proposed amendments to the Central Arizona Marketing Order, including proposals to classify filled milk under the order and to review the producer-handler definition. See 31 F.R. 16227; 32 F.R. 140; 32 F.R. 415. The public hearing was held in Phoenix, Arizona, on February 7-10, 1967, and interested parties, including Rasmussen, appeared, presented evidence, and filed briefs. On October 9, 1967, a Recommended Decision was issued. 32 F.R. 14232. The decision concluded that (1) filled milks should be priced as Class I products, and (2) producer-handlers should not be exempted if they use milk powder not of their own production to manufacture filled milk. 32 F.R. 14233. Exceptions to this Recommended Decision were filed by Rasmussen and others.

Subsequently, the Secretary, following a series of public meetings determined to hold national hearings on the question of "how filled milk should be classified and priced" under all Federal milk orders. 34 F.R. 16881. This national hearing, held at Memphis, Tennessee in 1968, reopened prior hearings on thirteen orders including that for Central Arizona. Rasmussen appeared at these hearings, but rather than present any evidence additional to what he had already presented at Phoenix, objected to the location of the national hearings and moved to adjourn or dismiss them. The requests were denied, and Rasmussen took no further action except to file exceptions to the Recommended Decision that followed the hearings. The Secretary then issued a Final Decision applicable to all marketing orders (34 F.R. 16881), and a Final Decision incorporating its findings and conclusions and the same terms for Central Arizona. 34 F. R. 16548.

In the Final Decision the Secretary concluded that the skim milk component of filled milk, whether obtained from fluid skim milk or reconstituted dry milk powder, should be priced and pooled as a Class I product. 34 F.R. 16882-83. The Final Decision also provided that if a producer-handler reconstitutes nonfat powder into a fluid milk product, he loses the privilege of exemption provided to producer-handlers like Rasmussen.

Title 7 U.S.C. § 608c(15) provides for administrative and judicial review. Subsection (A) provides that "any handler subject to an order may file a written petition with the Secretary of Agriculture, stating that any such order . . . is not in accordance with law and praying for a modification thereof or to be exempted therefrom." It requires that the handler be given an opportunity for a hearing. After the hearing, the Secretary "shall make a ruling upon the prayer of such petition which shall be final, if in accordance with law." Subsection (B) provides that "the District Courts of the United States in any district in which such handler is an inhabitant . . . are vested with jurisdiction in equity to review such ruling, provided a bill in equity for that purpose is filed within twenty days from the date of entry of such ruling." Rasmussen chose not to file a petition pursuant to section 608c(15) (A), but instead filed the present action in the district court.

2. Failure to exhaust administrative remedy—Rasmussen's appeal No. 25,668.

The trial judge dismissed Rasmussen's case for failure to exhaust his administrative remedy. This was correct. The principles of United States v. Ruzicka, 1946, 329 U.S. 287, 67 S.Ct. 207, 91 L.Ed. 290, are controlling. Ruzicka arose in the context of an enforcement action under Section 608a, but its principles apply with equal force to Rasmussen's present suit. In Ruzicka, the Supreme Court was concerned with the distribution of authority between the courts and the Secretary. The Court first noted that the "procedure devised by Congress explicitly gives to an aggrieved handler an appropriate opportunity for the correction of errors or abuses by the agency charged with the intricate business of milk control." Id. at 292, 67 S.Ct. at 209. The Court also indicated that this administrative remedy should be employed even though the matter to be reviewed was essentially a legal or constitutional question:

". . . whether . . . an order is or is not in accordance with law is not a question that brings its own immediate answer, or even an answer which it is the familiar, everyday business of courts to find. Congress has provided a special procedure for ascertaining whether . . . an order is or is not in accordance with law. The questions are not, or may not be, abstract questions of law. Even when they are formulated in constitutional terms, they are questions of law arising out of, or entwined with, factors that call for understanding of the milk industry. And so Congress has provided that the remedy in the first instance must be sought from the Secretary of Agriculture." Id. at 294, 67 S.Ct. at 210 (Emphasis added.)

We have followed Ruzicka. Panno v. United States, 9 Cir., 1953, 203 F.2d 504; see also La Verne Co-op. Citrus Ass'n v. United States, 9 Cir., 1944, 143 F.2d 415.

Stark v. Wickard, 1944, 321 U.S. 288, 64 S.Ct. 559, 88 L.Ed. 733, on which Rasmussen relies, is not in point. There, the party regulated by the order was a producer, for whom Congress had failed to provide an administrative remedy. In upholding judicial review, the Court relied on the fact that the statute created "definite personal rights" in producers. (321 U.S. at 309, 64 S.Ct. 559.) Gardner v. Toilet Goods Ass'n, Inc., 1967, 387 U.S. 167, 87 S.Ct. 1526, 18 L.Ed.2d 704, is also not in point. The statute there involved did not provide for an administrative remedy to attack the regulation involved. In Abbot Laboratories v. Gardner, 1967, 387 U.S. 136, 141-6, 87 S.Ct. 1507, 18 L.Ed.2d 681, decided the same day as Gardner, the Court based much of its analysis on language in 21 U.S.C. § 371(f) (6), which provides:

"The remedies provided for in this subsection shall be in addition to and not in substitution for any other remedies provided by law."

Rasmussen argues that 7 U.S.C. § 608a(8) contains similar language, and thereby provides the statutory basis for the present action. Section 608a(8) states:

"The remedies provided for in this section shall be in addition to, and not exclusive of, any of the remedies or penalties provided for elsewhere in this chapter or now or hereafter existing at law or in equity."

However, as the Court held in Ruzicka, supra, 329 U.S. 291, n.2, 67 S.Ct. 207, this language, in context, refers only to the government's remedies, not to Rasmussen's.

Finally, Rasmussen argues that the Supreme...