U.S. v. Cal-Almond Inc., CAL-ALMOND

• Decision Date: 19 December 1996
• Docket Number: Nos. 95-17209,95-17333,CAL-ALMOND,s. 95-17209
• Citation: 102 F.3d 999
• Parties: 96 Cal. Daily Op. Serv. 9220, 96 Daily Journal D.A.R. 15,229 UNITED STATES of America, Plaintiff-Appellant, v.INC., Defendant-Appellee, and Gold Hills Nut Co., Inc.; Del Rio Nut Co. Inc.; James G. Crecilius, dba Monte Vista Farming Company, Defendants. UNITED STATES of America, Plaintiff-Appellant, v.INC.; Gold Hills Nut Co., Inc.; Del Rio Nut Co. Inc.; James G. Crecilius, dba Monte Vista Farming Company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 999

102 F.3d 999

96 Cal. Daily Op. Serv. 9220, 96 Daily Journal

D.A.R. 15,229

UNITED STATES of America, Plaintiff-Appellant, v. CAL-ALMOND INC., Defendant-Appellee, and Gold Hills Nut Co., Inc.; Del Rio Nut Co. Inc.; James G.

Crecilius, dba Monte Vista Farming Company, Defendants.

UNITED STATES of America, Plaintiff-Appellant, v. CAL-ALMOND INC.; Gold Hills Nut Co., Inc.; Del Rio Nut Co.

Inc.; James G. Crecilius, dba Monte Vista Farming

Company, Defendants-Appellees.

Nos. 95-17209, 95-17333.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Aug. 13, 1996.

Decided Dec. 19, 1996.

Frank W. Hunger and Mark W. Pennak, United States Department of Justice, Washington, DC, for plaintiff-appellant.

Brian C. Leighton, Clovis, CA, for defendant-appellee, Cal-Almond, Inc.

Ronald C. Hillberg, Turlock, CA, for defendant-appellee, Del Rio Nut Company.

Appeals from the United States District Court for the Eastern District of California, Robert E. Coyle, District Judge, Presiding. D.C. No. CV-94-05985-REC.

Before: WIGGINS and TROTT, Circuit Judges, and VANCE, ^** District Judge.

WIGGINS, Circuit Judge:

The United States appeals the district court's order denying a preliminary injunction requesting enforcement of an almond marketing order promulgated by the Secretary of Agriculture pursuant to the Agricultural Marketing Agreement Act of 1937 ("the Act"). See 7 U.S.C. § 608c. The government also appeals the district court's order requiring the Almond Board to place Appellee Cal-Almond's payment of assessments for the 1992-93 and 1993-94 season into escrow. We have jurisdiction over these timely appeals pursuant to 28 U.S.C. § 1292(a)(1) and we AFFIRM.

I.

In Cal-Almond, Inc. v. United States Department of Agriculture, 14 F.3d 429 (9th Cir.1993) ("Cal-Almond I "), we held that the Almond Board's advertising and promotion program for the 1980-81 through 1990-91 seasons violated the First Amendment rights of the almond handlers. Subsequently, we held that the handlers were entitled to a refund of all advertising and promotion assessments paid to the Almond Board or escrowed during the pendency of the administrative petition proceedings. Cal-Almond, Inc. v. United States Department of Agriculture, 67 F.3d 874 (9th Cir.1995), cert. denied, --- U.S. ----, 117 S.Ct. 72, 136 L.Ed.2d 32 (1996) ("Cal-Almond II "). We also held, however, that sovereign immunity barred the recovery of money the handlers paid to third parties for creditable advertising under the marketing order, since recovery of such sums would constitute damages. Id. at 877-79.

In response to the Cal-Almond litigation, the Department of Agriculture changed the marketing order and administrative rules and regulations, starting with the 1993-94 season. 58 Fed.Reg. § 43500 (Aug. 17, 1993). Five almond handlers ("the handlers") ¹ filed an administrative petition under 7 U.S.C. § 608c(15)(A) challenging the promotion plan as unlawful for the subsequent marketing years not covered by the Cal-Almond I litigation (the 1992-93, 1993-94 and 1994-95 seasons). On June 15, 1995, the administrative law judge ruled in favor of the handlers, finding that under Cal-Almond I the revised regulations violate the handlers' First Amendment rights. The Secretary appealed the decision and the appeal is still pending before the Department of Agriculture's Judicial Officer.

Meanwhile, on September 23, 1994, while the administrative petition was pending, the United States brought an enforcement action for the 1993-94 season against the handlers pursuant to 7 U.S.C. § 608a(6). The government moved for summary judgment and for a preliminary injunction requiring the handlers to pay all assessments due and owing to the Almond Board during the pendency of the administrative proceedings. While these motions were pending, Cal-Almond mistakenly paid the Almond Board all back-due advertising and promotion assessments for the 1992-93 and 1993-94 seasons. Cal-Almond moved for return of the money. On September 12, 1995, the district court ordered the Almond Board to place the $862,549 erroneously paid by Cal-Almond into the clerk's registry ("the escrow order"). On September 22, 1995, the district court denied the government's motion for summary judgment and for a preliminary injunction. The government timely appealed both orders.

II.

A. JURISDICTION OVER THE APPEAL FROM THE ESCROW ORDER

As a preliminary issue, we must determine whether we have jurisdiction over the government's appeal from the escrow order. 28 U.S.C. § 1292(a)(1) provides this court with jurisdiction over appeals from "[i]nterlocutory orders of the district courts ... granting, continuing, modifying, refusing or dissolving injunctions...." An order that is not labelled as an order denying or granting a preliminary injunction may still be appealable under § 1292(a) if (1) it has the "practical effect" of granting or denying a preliminary injunction, (2) it has " ' "serious, perhaps irreparable consequences," ' " and (3) it " 'can be "effectively challenged" only by immediate appeal.' " Orange County v. Hongkong & Shanghai Banking Corp., Ltd., 52 F.3d 821, 825 (9th Cir.1995) (quoting Sierra Club v. Electronic Controls Design, 909 F.2d 1350, 1353 (9th Cir.1990)).

In determining whether an order has the practical effect of granting or denying an injunction, we evaluate the order in light of the essential attributes of an injunction. The three fundamental characteristics of an injunction are that it is (1) "directed to a party," (2) "enforceable by contempt," and (3) "designed to accord or protect 'some or all of the substantive relief sought by a complaint' in more than preliminary fashion."

Id. (quoting 16 Charles A. Wright et al., Federal Practice and Procedure § 3922 at 29 (1977)).

Here, the escrow order satisfies the above three factors: it is directed to the Almond Board, enforceable by contempt, and designed to protect Cal-Almond by placing the assessments sought in the complaint in escrow pending the resolution of the action. Cf. id. at 826 (holding that lis pendens order is not appealable because "[t]he fact that the lis pendens does not compel a party to act or refrain from acting under threat of contempt fundamentally distinguishes it from an injunction"). Moreover, given that we have held that the violation of a marketing order gives rise to a presumption of irreparable injury, the escrow order, which essentially permits Cal-Almond to continue to refuse to pay the Almond Board owed assessments, has serious or irreparable consequences. Finally, the order cannot be effectively challenged absent immediate appeal.

Thus, we conclude that the escrow order is appealable.

B. DENIAL OF THE SECRETARY'S MOTION FOR A PRELIMINARY INJUNCTION

1. Standard of Review

We review the denial of a motion for preliminary injunction to determine whether the district court "abused its discretion or based its decision on an erroneous legal standard or on clearly erroneous findings of fact." Triad Systems Corp. v. Southeastern Express Co., 64 F.3d 1330, 1334 (9th Cir.1995), cert. denied, --- U.S. ----, 116 S.Ct. 1015, 134 L.Ed.2d 96 (1996); United States v. Nutri-Cology, Inc., 982 F.2d 394, 397 (9th Cir.1992).

2. Analysis

The Secretary argues that the district court abused its discretion in failing to grant a preliminary injunction enforcing the almond marketing order for the years at issue, claiming that the court impermissibly considered the almond handlers defenses to enforcement. We disagree.

To begin, we acknowledge that the Secretary correctly contends that he has a right to enforce the terms of a marketing order, regardless of any defenses that have not yet been administratively exhausted. The Act permits 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.' " Saulsbury Orchards and Almond Processing, Inc. v. Yeutter, 917 F.2d 1190, 1193-94 (9th Cir.1990) (quoting 7 U.S.C. § 608c(15)(A)). After the Secretary has rendered a final decision, handlers may seek judicial review in district court. Id.; 7 U.S.C. § 608c(15)(B).

Regardless of any pending petition, the Secretary can file an enforcement action pursuant to 7 U.S.C. § 608a(6) "to enforce, and to prevent and restrain any person from violating any order, regulation, or agreement" issued pursuant to the Act. 7 U.S.C. § 608a(6). 7 U.S.C. § 608c(15)(B) further provides that "[t]he pendency of proceedings instituted pursuant to the subsection (15) shall not impede, hinder, or delay the United States or the Secretary of Agriculture from obtaining relief pursuant to section 608a(6) of this title." 7 U.S.C. § 608c(15)(B).

Both the Supreme Court and this court have interpreted § 608c(15)(B) as requiring exhaustion of administrative remedies through a § 608c(15)(A) proceeding prior to asserting any challenge to a marketing order, whether as a defense to an enforcement action or as a direct challenge. See United States v. Ruzicka, 329 U.S. 287, 67 S.Ct. 207, 91 L.Ed. 290 (1946) (milk handlers could not assert that marketing order was not in accordance with law as a defense to § 608a(6) enforcement action until final decision was rendered on pending administrative petition); Saulsbury Orchards, 917 F.2d at 1194 (holding that handlers could not bring action challenging Almond Board's marketing order until administrative remedies were exhausted); Navel Orange Administrative Committee v. Exeter Orange Co., Inc., 722 F.2d 449, 453-54 (9th Cir.1983) ("[A] defendant in an enforcement action cannot raise affirmative defenses which have not first been finally determined in a § 6008c(15)(A) administrative proceeding."); see also Pescosolido v. Block, 765 F.2d 827, 830-31 (9th Cir.1985) (holding that mandamus could not be invoked nor could the...