Saulsbury Orchards and Almond Processing, Inc. v. Yeutter

• Citation: 917 F.2d 1190
• Decision Date: 29 October 1990
• Docket Number: No. 87-2955,87-2955
• Parties: SAULSBURY ORCHARDS AND ALMOND PROCESSING, INC., Plaintiff-Appellant, v. Clayton K. YEUTTER, * individually and as Secretary of Agriculture; John Block, individually and as former Secretary of Agriculture; the Almond Board of California, an administrative agency; Peggy Leong, individually and as Manager of the Almond Board of California; Pete Yamamoto; Roger Baccigalupi; Steve Easter; Walt Payne; Frank Clement; Sam Lewis, Col., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1190

917 F.2d 1190

SAULSBURY ORCHARDS AND ALMOND PROCESSING, INC., Plaintiff-Appellant, v. Clayton K. YEUTTER, ^* individually and as Secretary of Agriculture; John Block, individually and as former Secretary of Agriculture; the Almond Board of California, an administrative agency; Peggy Leong individually and as Manager of the Almond Board of California; Pete Yamamoto; Roger Baccigalupi; Steve Easter; Walt Payne; Frank Clement; Sam Lewis, Col. Defendants-Appellees.

No. 87-2955.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 12, 1988.

Submission Withdrawn Dec. 15, 1988.

Resubmitted Aug. 22, 1989.

Decided Oct. 29, 1990.

Brian C. Leighton, Law Firm of Thomas E. Campagne, Fresno, Cal., for plaintiff-appellant.

John F. Daly, Dept. of Justice, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Eastern District of California.

Before FLETCHER, BEEZER and O'SCANNLAIN, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

Saulsbury Orchards, an almond handler, brought an action challenging the constitutionality of an almond marketing order promulgated by the Secretary of Agriculture under the Agricultural Marketing Agreement Act. The district court dismissed the complaint for failure to exhaust administrative remedies under the Act.

I

Congress enacted the Agricultural Marketing Agreement Act ("Act") in 1937. See 7 U.S.C. Secs. 601-674. The Act authorizes the Secretary of Agriculture to promulgate marketing orders designed to establish and maintain orderly marketing conditions. See 7 U.S.C. Sec. 608c. Marketing orders regulate the activities of processors of agricultural commodities, known under the Act as "handlers"; such commodities include almonds. The Act states that marketing orders may provide for, among other things, "the establishment of production research, marketing research and development projects designed to ... promote the marketing, distribution, and consumption or efficient production" of the particular commodity with "the expense of such projects to be paid from funds collected pursuant to the marketing order." 7 U.S.C. Sec. 608c(6)(I). Such projects may provide for "any form of marketing promotion including paid advertising." Id. In addition, with respect to certain commodities (including almonds), the projects may provide for "crediting the pro rata expense assessment obligations of a handler with all or any portion of his direct expenditures for such marketing promotion including paid advertising." Id.

The Secretary promulgated such a marketing order regulating the marketing of almonds in California. See 7 C.F.R. Secs. 981.1-981.474. Because Saulsbury Orchards ("Saulsbury") fits within the Act's definition of an almond handler, see 7 C.F.R. Secs. 981.13, 981.16, it is subject to the mandates of this order.

The order establishes the Almond Board of California ("Board") and sets forth the procedures for the Board's operation as well as its powers and responsibilities. ¹ The order authorizes the Board to recommend to the Secretary the level of assessments and to collect any assessments the Secretary imposes on the handlers.

This action represents the second time Saulsbury has been before this court to challenge the constitutionality of the order and the assessments imposed pursuant to it. The United States initiated the first action in 1986 when it sought an injunction in federal district court to compel payment of some $300,000 in assessments which Saulsbury allegedly owed and had not paid to the Board. See 7 U.S.C. Sec. 608a(6). The district court granted summary judgment in favor of the government, and ordered Saulsbury to comply with the provisions of the marketing order. The court refused to entertain Saulsbury's affirmative defenses concerning the constitutionality of the marketing order because it found that Saulsbury had not exhausted its administrative remedies. We affirmed the district court judgment. See United States v. Saulsbury Orchards & Almond Processing, Inc., 857 F.2d 1479 (9th Cir.1988) (unpublished memorandum).

In April 1987, Saulsbury filed an administrative petition challenging the order under 7 U.S.C. Sec. 608c(15)(A). The administrative law judge dismissed the petition, ruling that the petition failed to comply with procedural requirements because of its vagueness and because the constitutional issues raised were beyond the proper ambit of the section (15)(A) proceeding. Saulsbury appealed to the departmental Judicial Officer from the portion of the ALJ's decision relating to constitutional issues, and also filed an amended complaint in an attempt to correct the technical deficiencies. ²

Meanwhile, Saulsbury filed a complaint in federal district court for the Eastern District of California, again alleging that the order is unconstitutional. Specifically, Saulsbury alleged that the order violated its first amendment rights by "forcing it to advertise" and that its due process right was violated by virtue of CAGE's control of the Board. The complaint, which names the Secretary, the former Secretary, the Board, the Manager of the Board, and six members of the Board as defendants, sought declaratory and injunctive relief against the defendants in both their official and individual capacities, and monetary damages against the defendants in their individual capacities. The district court dismissed the action, holding that Saulsbury had failed to exhaust its administrative remedies. In particular, the district court relied on the fact that Saulsbury had not, as of that time, appealed from the ALJ's decision, and thus, the Secretary had not ruled on the section (15)(A) petition. ³

Saulsbury timely appealed to this court. We deferred submission of the case and ordered the parties to enter into settlement negotiations. The case was submitted on August 22, 1989, however, after the parties failed to reach a settlement.

II

The Act authorizes an aggrieved handler to present an administrative petition "stating that any [marketing] order or any provision of any such order or any obligation imposed in connection [with an order] is not in accordance with law and praying for a modification thereof or to be exempted therefrom." 7 U.S.C. Sec. 608c(15)(A). After the Secretary has rendered a final unfavorable decision, handlers may seek judicial review in federal district court. See 7 U.S.C. Sec. 608c(15)(B); 7 C.F.R. Sec. 900.64(c) ("[N]o decision shall be final for the purpose of judicial review except a final decision issued by the Secretary pursuant to an appeal by a party to the proceeding.").

The Act has been interpreted by the Supreme Court as strictly requiring that handlers exhaust administrative remedies before seeking judicial review in federal courts. In United States v. Ruzicka, 329 U.S. 287, 67 S.Ct. 207, 91 L.Ed. 290 (1946), the government had brought an action, pursuant to 7 U.S.C. Sec. 608a(6), for an injunction to force milk handlers to pay into a milk fund that was created by the Secretary. In the enforcement action, the handlers argued that the demand was based upon faulty inspection of their accounts and improper testing of their milk and milk products. The Supreme Court held that the milk handlers could not raise these defenses in an enforcement proceeding because they failed to first present the arguments in a section 608c(15)(A) administrative proceeding. Id. at 294, 67 S.Ct. at 210. The Ruzicka Court emphasized that the Act should not be interpreted as granting courts "the right to consider independently, in a proceeding by the Government for the enforcement of the Secretary's order, questions for which Congress explicitly furnished the handler an expert forum for contest with ultimate review by a district court." Id. at 292, 67 S.Ct. at 209-10.

Courts have repeatedly applied and extended the Ruzicka holding that exhaustion of administrative remedies is required under the Act before judicial review is available. See, e.g., United States v. Riverbend Farms, Inc., 847 F.2d 553, 559 (9th Cir.1988) (determining that exhaustion of administrative remedies is required before handler may raise affirmative defenses in a civil forfeiture action); Rasmussen v. Hardin, 461 F.2d 595, 597 (9th Cir.) (milk producers/handlers who had not exhausted administrative review procedures could not seek judicial review of order), cert. denied, 409 U.S. 933, 93 S.Ct. 230, 34 L.Ed.2d 188 (1972); see also Block v. Community Nutrition Inst., 467 U.S. 340, 104 S.Ct. 2450, 81 L.Ed.2d 270 (1984) (consumers precluded from obtaining judicial review of marketing order because the statutory scheme lacks express provision allowing for consumer participation in any proceeding).

We are also mindful of the fact that the exhaustion requirement in this case is statutorily provided and not judicially created. Although judicially developed exhaustion requirements might be waived for discretionary reasons by courts, statutorily created exhaustion requirements bind the parties and the courts. "When a statute requires exhaustion, a petitioner's failure to do so deprives this court of jurisdiction. Only if there is no statutory exhaustion requirement may we exercise our discretion to apply judicially-developed exhaustion rules." Reid v. Engen, 765 F.2d 1457, 1462 (9th Cir.1985) (citations omitted).

Saulsbury raises several arguments that Ruzicka and its progeny are inapplicable to this action. First, Saulsbury argues that Ruzicka is distinguishable because it involved only the assertion of affirmative defenses in an enforcement action commenced by the government under section 608a(6). Saulsbury's narrow reading of Ruzicka, however, has been squarely rejected by this court; we have applied Ruzicka 's interpretation of the Act's statutory exhaustion requirement to nonenforcement cases. For example, in Rasmussen we considered whether a milk handler and producer could bring an action in federal district court challenging a certain...