Unpublished Disposition, 917 F.2d 29 (9th Cir. 1989)

MEMORANDUM^** 

We are asked to decide whether aggrieved nectarine handlers may seek injunctive relief against the Secretary of Agriculture in federal district court without first exhausting administrative remedies under the Agricultural Marketing Agreement Act.

* Appellants are growers and handlers of nectarines subject to the Agricultural Marketing Agreement Act of 1937 ("Act"). See 7 U.S.C. §§ 601-674. The Act authorizes the Secretary of Agriculture to promulgate marketing orders that regulate, among other things, the quality of certain fruits and vegetables, the quantity of the commodity which may be shipped to the market, and research and development activities. See 7 U.S.C. § 608c(6), (7). The Secretary also has power to establish agencies to administer the marketing orders covering particular commodities. See 7 U.S.C. § 608c(7) (C).

Pursuant to the Act, the Secretary promulgated the Nectarine Marketing Order in 1958, see 7 C.F.R. Secs. 916.1-916.356, and established the Nectarine Administrative Committee to administer the Nectarine Marketing Order, see 7 U.S.C. § 608c(7). The Nectarine Administrative Committee has specific authority to make and to adopt rules and regulations governing the production and quality of nectarines within its jurisdiction. See 7 C.F.R. Sec. 916.30(c).

The Nectarine Marketing Order is primarily a quality control order. For several years the maturity standard for nectarines was determined by U.S. Grade No. 1, which required nectarines to be "mature but not soft or overripe ... [with] at least 75 percent of the nectarines in any lot [showing] some blushed or red color." After receiving complaints regarding the nectarines' lack of maturity, however, the Nectarine Administrative Committee voted to recommend that the seasonal regulations be amended to provide for a higher maturity level called the "well-matured" standard, based on a test using a spectrum of color chips, ranging from green to yellow. Each variety of nectarine is assigned a particular color chip. The correspondence of the color of the nectarine to the color chip indicates that the fruit is well-matured.

The rule specifically provided:

No handler shall ship:

1. Any package or container of any variety of nectarines unless such nectarines meet the requirements of U.S. No. 1 grade: Provided, that maturity shall be determined by the application of color standards by variety or such other tests as determined to be proper by the Federal or Federal-State Inspection Service.

7 C.F.R. Sec. 916.356 (1981).¹ 

On April 20, 1987, appellants filed an administrative petition, pursuant to 7 U.S.C. § 608c(15) (A), alleging that the well-matured standard was illegal and that they had been unlawfully forced to throw away portions of their harvests.²  At the same time, appellants filed an administrative petition requesting interim relief under 7 C.F.R. Sec. 900.70, which authorizes suspending the enforcement of a challenged marketing order pending the Secretary's final determination of an administrative petition. Appellants' request for interim relief was denied by a departmental Judicial Officer. Their request for an expedited hearing in the administrative forum was also denied.

On July 24, 1987, appellants filed a complaint in the United States District Court for the Eastern District of California, alleging, in part, that application of the well-matured standard violated their due process rights under the fifth amendment. They sought both a declaration that the well-matured standard was illegal and a permanent injunction prohibiting the enforcement of the standard. Appellants also requested a temporary restraining order.

Concluding that it lacked subject matter jurisdiction under 7 U.S.C. § 608c(15) (B), the district court dismissed the complaint on August 7, 1987. On August 14, 1987, appellants moved the district court to reconsider its order; the court denied the motion on November 5, 1987.

The appellants 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 primary issue raised in this appeal is whether the district court properly concluded that it did not have subject matter jurisdiction to consider appellants' action for injunctive relief. The district court dismissed appellants' action because it determined that appellants had failed to exhaust administrative remedies as required by the Act. We review a district court's dismissal of an action for lack of subject matter jurisdiction de novo. See Clayton v. Republic Airlines, Inc., 716 F.2d 729, 730 (9th Cir. 1983).

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. § 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. § 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 (1946), the government had brought an action, pursuant to 7 U.S.C. § 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 first to present the arguments in a section 608c(15) (A) administrative proceeding. Id. at 294. 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.

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 (1972); see also Block v. Community Nutrition Inst., 467 U.S. 340 (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).

Appellants do not contend that they have exhausted administrative remedies. Rather, they argue that the exhaustion requirement should not apply to them for various reasons. First, they assert that Ruzicka does not apply to the instant case because Ruzicka addressed only the ability of a handler to raise affirmative defenses to an enforcement action commenced by the government under section 608a(6). Appellants' 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 milk order. In affirming the district court's dismissal of the case for failure to exhaust administrative remedies, we noted that " [t]he principles of United States v. Ruzicka 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." Rasmussen, 461 F.2d at 597 (citations omitted).

Appellants also argue that Ruzicka is distinguishable from the instant case because it did not concern constitutional issues. We find this argument unpersuasive. It is clear that Congress authorized the Secretary to review initially all challenges by handlers to marketing orders, including those raising constitutional concerns. Indeed, the Ruzicka Court observed:

Congress has provided a special procedure for ascertaining whether such 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. It is on the basis of his ruling, and of the elucidation which he would presumably give to his ruling, that resort may be had to the courts.

Ruzicka, 329 U.S. at 294 (emphasis added). Moreover, in Rasmussen, we expressly followed Ruzicka, even though the milk producer/handler had brought an action alleging, among other things, that a milk marketing order violated the handler's constitutional due process rights. "The [Ruzicka ] Court also indicated that this administrative remedy should be employed even though the matter to be reviewed was essentially a legal or constitutional question." Rasmussen, 461 F.2d at 597-98.

Sound policy reasons underlie the requirement that all substantive matters be considered first by the Secretary. " [A] rule permitting handlers to challenge [constitutionality] without first exhausting their administrative remedies ... would often deprive the court of the benefit of the views of those possessed of day-to-day experience in administering the federal milk-marketing program." American Dairy of Evansville, Inc. v. Bergland, 627 F.2d 1252, 1271 (D.C. Cir. 1980) (Robinson, J., dissenting). Furthermore, a handler's pursuit of its administrative remedies may result in relief on nonconstitutional grounds, and thus supports our prudential consideration of not reaching constitutional questions unless necessary. See Rosenberg v. Fleuti, 374 U.S. 449, 451 (1963) (courts have recognized a long established principle that questions of constitutionality should not be reached unless such adjudication is unavoidable).

Finally, appellants argue that they should be excused from the exhaustion requirement because, even if they were to prevail in the administrative proceedings, they could not obtain the monetary damages that they seek. Specifically, appellants assert that, unlike the milk handlers in Ruzicka, they do not have a fund from which the Secretary could award monetary damages.

We have previously indicated, however, that a remedy would be available to nonmilk handlers who ultimately prevail in their petitions. In Riverbend we noted that "the district court, upon proper application, can shape relief to protect the handler's rights in case any challenge to the marketing order is ultimately substantiated." 847 F.2d at 559; see also Navel Orange Admin. Comm. v. Exeter Orange Co., 722 F.2d 449, 452 (9th Cir. 1983) ("If the ultimate determination of the administrative proceeding, emanating either from the Secretary of Agriculture or from the federal courts through the statutory right of appeal, should substantiate [appellant's] challenges to the marketing orders, then refund of any assessments found not to have been due would be in order.").

Moreover, we note that courts have refused to open avenues for handlers to circumvent the exhaustion requirement. See, e.g., Rasmussen, 461 F.2d at 600 (noting that if consumers had standing under the Act it would "provide a handler with a convenient device for evading the statutory requirement that he first exhaust administrative remedies"). Accepting appellants' argument would provide all nonmilk handlers an opportunity to circumvent the exhaustion requirement. The Act, expressly and as interpreted by Ruzicka and its progeny, precludes the courts from reviewing a handler's challenge to a marketing order until the Secretary has rendered a final decision. Thus, under the Act, the Secretary must first review the merits of appellants' administrative petition. If appellants succeed in the administrative proceedings, then, as we indicated in Riverbend and Navel Orange, we are satisfied that appropriate relief may be fashioned.³ 

III

We next consider whether the district court properly denied appellants' request for a preliminary injunction to suspend the application of the well-matured standard pending the Secretary's final determination on the administrative petition. The district court concluded that it did not have subject matter jurisdiction to consider appellants' request for interim relief.

Appellants sought interim relief in an administrative proceeding, pursuant to 7 C.F.R. Sec. 900.70. That section provides in part:

(a) Filing the application. A person who has filed a petition pursuant to Sec. 900.52 may by separate application filed with the hearing clerk apply to the Secretary or [sic] an order postponing the effective date of, or suspending the application of, the marketing order or any provision thereof, or any obligation imposed in connection therewith, pending final determination of the proceeding.

7 C.F.R. Sec. 900.70. Appellants allege that a Judicial Officer denied appellants' request for interim relief, stating that it was the Secretary's position not to grant interim relief under 7 C.F.R. Sec. 900.70.

Although we are sympathetic with appellants' frustration with the Secretary, appellants have not demonstrated that an exception to the exhaustion requirement exists for questions concerning interim relief. Indeed, we have previously observed that a section 608c(15) (A) proceeding is a handler's exclusive course of action. See Pescosolido v. Block, 765 F.2d 827, 831 (9th Cir. 1985) (" [H]andlers are provided an administrative remedy to challenge market orders under 7 U.S.C. § 608c(15) (A). This is their exclusive method of redress.") (emphasis in original). We therefore conclude that the district court properly dismissed appellants' action for preliminary injunctive relief.

IV

Forced as we are to affirm dismissal for failure to exhaust, and despite our efforts to induce settlement, we are appalled by the failure of the Secretary to deal expeditiously with the substantial grievances alleged in this complaint. We have waited in vain since December 12, 1988 for news of a final appealable order by the Secretary. We wait no longer. We remand to the district court for determination, under 5 U.S.C. § 706(1), whether the Secretary's action has been "unreasonably delayed," in which case the district court shall order the Secretary to expedite final disposition of the administrative proceeding in this case. In addition, the district court may wish to order the Secretary to advise it promptly of the Secretary's expected final administrative decision date. Any further appeals shall be directed to the attention of this panel.

AFFIRMED IN PART AND REMANDED IN PART.