UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

_________________________________________ ) NICK KORETOFF, d/b/a ) NICK KORETOFF RANCHES, et al. , ) ) Plaintiffs, ) ) v. ) Civil Action No. 08-1558 (ESH) ) THOMAS VILSACK, Secretary, 1 ) United States Department of Agriculture, ) ) Defendant. ) _________________________________________ )

MEMORANDUM OPINION Plaintiff almond growers, handl ers, and grower-handlers in the State of California bring this action pursuant to the Agricultural Mark eting Agreement Act of 1937 (“AMAA”), 7 U.S.C. § 601 et seq. , and the Administrative Procedure Act (“APA”), 5 U.S.C. § 706, against the Secretary of the United States Department of Agriculture (“USDA”) to challenge a USDA regulation requiring almond handler s to treat raw almonds in or der to reduce the risk of Salmonella bacteria contamination. This matter is before the Court on defendant’s motion to dismiss the complaint. For the reasons set forth below, the Court will grant the motion. BACKGROUND The AMAA authorizes the Secretary of Agri culture to promulgate marketing orders designed to establish and maintain orderly mark eting conditions for agricultural commodities.
See 7 U.S.C. §§ 602, 608c. Marketing orders regulate the activities of proce ssors, associations of

1 Thomas Vilsack, current Secretary of the Un ited States Department of Agriculture, is substituted for his predecessor, former Secret ary Edward Schafer. Fed. R. Civ. P. 25(d).- 2 - producers, and others engaged in the handling of certain agricultural commodities, known under the Act as “handlers.” Id. § 608c(1), see also 7 C.F.R. §§ 981.13, 981.16 (defining “handler” and “to handle” for purposes of th e California almond market). Th ey do not regulate farmers in their capacity as producers (or growers). See id. § 608c(13)(B). The AMAA specifies the terms and conditions that a marketing order may cont ain, including provisions “[l]imiting, or providing methods for the limitation of, th e total quantity of any such co mmodity or product, or of any grade, size, or quality thereof . . . .” Id. § 608c(6)(A). Before issuing or amending a marketing order, the Secretary must conduct a formal rule making proceeding with prior notice and hearing. Id. § 608c(3). In addition, before a marketing or der or amendment may become effective, its provisions must be adopted in a marketing agre ement by handlers of not less than 50% of the volume of the commodity covered by the proposed order or amendment and approved by at least two-thirds of affected growers, 2 or it may be adopted by the Secretary without consent of a handler majority subject to certain findings by the Secretary and grower approval. See id. §§ 608c(8), (9). The almond marketing order, 7 C.F.R. § 981.1 et seq. , regulates the ha ndling of almonds grown in California and is administered loca lly by the Almond Board of California (the “Board”), a ten-member board composed of gr owers and handlers nominat ed by the industry and selected by the Secretary. 7 C.F.R. §§ 981.22, 981.30- 981.33. The Board has the power to “make rules and regulations to effectuate the terms and provisions” of the almond marketing order, id. § 981.38(b); see also 7 U.S.C. § 608c(7)(C), and “to es tablish, with the approval of the Secretary, such minimum quality and inspection re quirements . . . as will contribute to orderly

2 In the case of certain citrus fru its, the approval per centages are higher.- 3 - marketing or be in the public interest.” 7 C.F.R. § 981.42(b). The administrative rules and regulations implementing the order ar e codified at 7 C.F.R. §§ 981.401-981.481. In August 2006, in response to Salmonella outbreaks in 2001 and 2004 and pursuant to its authority under the almond mark eting order to set outgoing qual ity control requirements, the Board recommended a mandatory treatment program to reduce the potential for Salmonella bacteria in almonds. See Outgoing Quality Control Requirements, 72 Fed. Reg. 15,021, 15,022 (Mar. 30, 2007). Specifically, th e Board recommended, with certa in exceptions, that handlers subject their almonds to a process that would achieve a minimum 4-log reduction in Salmonella bacteria prior to shipment. 3 Id. In December 2006, the Secr etary published the Board’s recommendation as a proposed rule, 71 Fed. Reg. 70,683 (proposed Dec. 6, 2006), and following a 45-day comment period, adopted the final rule without substantial ch ange on March 30, 2007. 72 Fed. Reg. 15,021. Plaintiffs allege that the almond treatment regulation (1) ex ceeds the authority granted by 7 C.F.R. § 981.42 to establish quali ty control requiremen ts; (2) creates a subs tantive rule adopted without the use of a formal rulemaking proces s and grower approval as required by the AMAA and by USDA Rules of Practice; (3) regulates food safety, an area beyond the limited authority granted to the Secretary under the AMAA; (4) is arbitrary, capricious, and not in accordance with law, in violation of the APA; (5) depe nds upon the lapsed authority of 7 C.F.R. § 981.42 and is therefore void; and (6) improperly regulates the retail market for al monds in violation of the AMAA. ( See Am. Compl. ¶¶ 4-5, 74-93.)

3 A 4-log reduction decreases bacteria by a factor of 10,000. Id. at 15,022.- 4 - ANALYSIS
I. The Claims of Almond Handlers Must be Di smissed for Lack of Subject Matter Jurisdiction Defendant argues that plaintiff almond handlers’ claims must be dismissed for failure to exhaust their administrative remedies. The AMAA authorizes an aggrie ved handler to file a petition with the Secretary “stating that any [mar keting] order or any provision of any such order or any obligation imposed in conne ction therewith is not in acco rdance with law and praying for a modification thereof or to be exempted there from.” 7 U.S.C. § 608c(15)(A). After a hearing, the Secretary will rule on the petition, which ruling “shall be final, if in accordance with law.” Id. If unsatisfied with the Secretary’s decision, th e handler may seek judici al review in federal district court. Id. § 608c(15)(B). These provisions have been interpreted by the Supreme Court to require handlers to exhaust their administrative remedies prior to seeking judicial review. See United States v. Ruzicka , 329 U.S. 287, 294 (1946) (“Congress has provide d 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 presumab ly give to his ruling, that resort may be had to the courts.”). Consistent with Ruzicka , the D.C. Circuit has unequivocally held that “the AMAA’s administrative appeal process is a mandatory procedure that handlers must follow prior to seeking judicial review” and from which they “may not be excused from complying.” Edaleen Dairy, LLC v. Johanns , 467 F.3d 778, 784-85 (D.C. Cir. 2006) (emphasis in original); see also Block v. Community Nutrition Institute , 467 U.S. 340, 346 (1984) (noting in the context of a consumer suit that “Section 608c(15) requires ha ndlers first to exhaust the administrative remedies made available by the Secretary” prior to seeking judicial review); Hershey Foods Corp. v. Dep’t of Agric., 293 F.3d 520, 526 (D.C. Cir. 2002) (stati ng that pursuant to § 608c(15),- 5 - “the remedy in the first instance must be sought from the Secretary”); Saulsbury Orchards & Almond Processing, Inc. v. Yeutter , 917 F.2d 1190 (9 th Cir. 1990) (affirming dismissal of suit by almond handlers for failure to exhaust). Faced with this clear precedent, plaintiffs turn to Avocados Plus, Inc. v. Veneman , 370 F.3d 1243 (D.C. Cir. 2004), which they claim mandates the conclusion that the AMAA’s exhaustion requirement is nonjurisdictional. In that case, plaintiff importers of avocados and avocado products sued alleging that the Hass Avocado Promotion, Research, and Information Act, 7 U.S.C. § 7801 et seq. , violated their First Amendment right to be free of compelled speech. The district court, relying on the Act’ s exhaustion requirement, which was virtually identical to the AMAA’s exhaus tion provision, dismissed the comp laint because plaintiffs had not exhausted their administrative remedies. Th e D.C. Circuit reversed. In doing so, the Court distinguished between ju dicially-created nonjurisdictional exhaustion, which may be excused by a court, and statutorily mandated jurisdictiona l exhaustion, which canno t be excused. 370 F.3d at 1247. The Court concluded that the statutor y provision at issue did not mandate exhaustion because it failed to contain “sweep ing and direct statutory langua ge indicating that there is no federal jurisdiction prior to exhaustion.” Id. at 1248 (quoting Weinberger v. Salfi , 422 U.S. 749, 757 (1975)). The Court therefore remanded the case to the district court to determine whether exhaustion should be excused. Despite the similarities between th e exhaustion provision at issue in Avocados Plus and the one at issue here, it is Edaleen Dairy that controls this case. In Edaleen Dairy , the D.C. Circuit specifically rejected plaintiff’s argument that the AM AA exhaustion requirement should be excused because the issue presented had been “fully framed” in the rulemaking process, the Secretary’s “full expertise” ha d already been brought to bear, and it would be “utterly- 6 - duplicative” to require administ rative review prior to suit. 467 F.3d at 784. The Court concluded that “[t]here is no n eed to address these arguments . . . because courts have held on numerous occasions that the AMAA’s exhaustion re quirement is mandatory. Thus, we hold that Edaleen may not be excused from complying with this requirement.” Id. (emphasis added); see also Hettinga v. United States , 518 F. Supp. 2d 58, 62 (D.D.C. 2007) (dismissing producerhandler claims for lack of subject matter ju risdiction based on their failure to exhaust administrative remedies), appeal docketed , No. 07-5403 (D.C. Cir. Dec. 19, 2007); Nw. Indep. Producers Ass’n v. Veneman , 312 F. Supp. 2d 23, 25 (D.D.C. 2004) (dismissing handler claims for same reason). “[A] mandatory [but nonjur isdictional] exhausti on requirement may be excused in appropriate circumstances, whereas a jurisdictional exhaus tion requirement never may be excused by a court.” Munsell v. USDA , 509 F.3d 572, 579 (D.C. Cir. 2007). 4 Thus, while the Court in Edaleen Dairy did not explicitly state that the exhaustion requirement was jurisdictional, it did refuse to consider plaintiff’s reasons why exhaustion should be waived, instead finding that the requirement coul d not be excused. This Court is bound by Edaleen Dairy

. Moreover, although the D.C. Circuit in Avocados Plus rejected the argument that Ruzicka compelled the conclusion in that case that e xhaustion was jurisdictional, the Court recognized that Avocados Plus dealt with a statutory enforcement sc heme that “[u]nlike the AMAA . . . does not provide for comprehensive mark et regulation that could be disrupted by ill-timed judicial

4 Although Munsell , unlike Avocados Plus , came after Edaleen Dairy , that case did not involve the AMAA, and it is axiomatic that “one panel [o f the D.C. Circuit] ca nnot overrule another.” Brown v. Brody , 199 F.3d 446, 453 (D.C. Cir. 1999) (citation omitted). Likewise, plaintiffs’ reliance on Arbaugh v. Y&H Corp. , 546 U.S. 500 (2006), is misp laced, as that case did not discuss the AMAA or make any attempt to di stinguish the Supreme Court’s decisions in Ruzicka or Community Nutrition

.- 7 - interference.” 467 F.3d at 1249. In addition, although the Court also opined that under precedents more modern than Ruzicka , the AMAA’s exhaustion requirement would be considered nonjurisdictional, it ultimately relied on the Ruzicka Court’s own limitation of its holding to “the precise problem before us in re lation to the provisions of the particular Act immediately relevant.” Id. at 1250 (quoting Ruzicka , 329 U.S. at 295). As in Ruzicka , this case involves the issue of whether handlers under th e AMAA must exhaust ad ministrative remedies; thus, the Supreme Court’s holding in that case controls here.
II. The Claims of Grower-Handlers and Retaile rs Must be Dismissed for Lack of Subject Matter Jurisdiction Moreover, grower-handlers and retailers in this case must also exhaust their administrative remedies prior to bringing suit. Because growers may in some circumstances be able to seek judicial review without being subject to the e xhaustion requirement, the crucial question with respect to grower-handlers is wh ether they are bringing suit as growers or as handlers. Edaleen Dairy , 467 F.3d at 783. Because the almond treatment regulation imposes the treatment obligation only on handlers, it necessarily follows that plaintiff grower-handlers have to be suing in their capacity as handlers. 5 See id. at 783 (“If a producer-han dler asserts an injury in its capacity as a handler, th en it is bound by the administrative exhaustion requirements of the AMAA.”). For the same reason, plaintiffs’ retailer claims must also be dismissed for failure to exhaust. A number of plain tiffs who sell almonds on the reta il market claim that the almond marketing order unlawfully classifies them as handlers. See 7 C.F.R. §§ 981.13, 981.16 (defining terms “handler” and “to handle”); 7 U.S.C. § 608c(13) (prohibiting regulation by

5 While all plaintiffs, whether growers, handl ers or both, claim that the almond treatment regulation reduces the market ability of their almonds ( see Am. Compl. ¶¶ 31-35), the regulation imposes direct burdens on handlers only.- 8 - marketing order of producers in their capacity as producers and, in the case of marketing orders adopted without the consent of a handler majority, of retailers in their capacity retailers). By their own admission, however, plaintiffs are only s ubject to the marketing order because they fit within the order’s definition of handler. Acco rdingly, plaintiffs are clearly bringing this challenge in their capacity as handlers and must therefore first exhaust their administrative remedies. 6 See United States v. Lamars Dairy, Inc. , 500 F.2d 84, 85 (7 th Cir. 1974) (exhaustion required where defendants claim to have b een incorrectly classified as handlers).
III. The Claims of Growers Must be Dismissed Because They Have No Right to Judicial Review Under the Circumstances of this Case Defendant also contends that the AMAA by im plication “preclude[s] judicial review” of grower claims, thereby withdrawing a cause of action under the APA, 5 U.S.C. § 701(a)(1). (Mot. to Dismiss at 6-7.) Th e Supreme Court’s decision in Block v. Community Nutrition
Institute , 467 U.S. 340 (1984), supports this claim. There, the Court rejected a suit by consumers challenging milk marketing orders. In doing s o, the Court noted that (1) Congress channeled disputes regarding marketing orders to the Secretary in the first in stance because of its belief that he had the necessary expertise to resolve th em; and (2) it would provide handlers with a convenient way to evade the statutory exhaustion requirement should consumers be permitted to bring suit. 467 U.S. at 347-48. Therefore, th e Court concluded that “Congress intended that judicial review of market orde rs issued under the [AMAA] ordi narily be confined to suits brought by handlers in accordance with 7 U.S.C. § 608c(15).” Id. at 348. Moreover, the Court held that the presumption favori ng judicial review of administ rative action had been “overcome

6 Notably, the existing definition of “to handle” was adopted in 1996. See Order Amending Almond Marketing Order, 61 Fed. Reg. 32,917 (June 26, 1996). However, plaintiffs apparently had little concern with the applicab ility of the definition to their ac tivities prior to the adoption of the almond treatment regulation in 2007.- 9 - by inferences of intent drawn from the statutory scheme as a whole.” Id. at 349 (citations omitted). Specifically, the Court noted that “w hen a statute provides a detailed mechanism for judicial consideration of particular issues at the behest of pa rticular persons, j udicial review of those issues at the behest of other pers ons may be found to be impliedly precluded.” 7 Id. ; see also Benson v. Schofield , 236 F.2d 719, 722 (D.C. Cir. 1956) (fi nding that producers are to be given no greater status by the AMAA than handlers who must exhaust); Nw. Indep. Producers
Ass’n v. Veneman , 312 F. Supp. 2d 23, 26 (D.D.C. 2004) (“[T ]he inclusion of producers in the administrative process but their exclusion from the provisions enabling judicial review is the type of omissions that indicate a specific Congressional in tent to omit.”). The Court’s statements apply equally to growers. Should they be allo wed to bring a direct act ion in federal court, handlers could easily circumvent the mandatory exhaustion requirement merely by finding a grower who would be willing to jo in in or initiate suit. Nevertheless, while growers normally have no right to sue, the Supreme Court has recognized a narrow exception to this rule. In Stark v. Wickard , 321 U.S. 288 (1944), the Court held that milk producers had standing to challe nge certain deductions by the Secretary from the producer settlement fund. Because producers were guaranteed by statute and by marketing order minimum prices and the “chal lenged deduction[s] reduce[d] pro tanto the amount actually received by the producers for thei r milk,” the Court found that th e producers were alleging injury to their “definite personal rights” that we re “not possessed by the people generally.” Id. at 302, 304, 309. Therefore, the producers had standing to obj ect to the administration of the settlement fund. Moreover, no other forum existed to challe nge the Secretary’s actions since handlers, who

7 For this reason, plaintiffs’ reliance ( see Opp’n at 13) on Aid Ass’n for Lutherans v. U.S. Postal Service , 321 F.3d 1166 (D.C. Cir. 2003), a case that did not involve the AMAA, for the proposition that a strong presumption exists in favor of judicial review under the APA is misplaced.- 10 - had no financial interest in the fund or its use, had no standing to sue. Id. at 308. Thus, the Court concluded that the statutor y scheme as a whole implicitly authorized producer suits to enforce these rights. See id. at 306-09; see also Edaleen Dairy, LLC v. Johanns , 467 F.3d 778, 783 (D.C. Cir. 2006) (noting that Stark turned on “two key factors: ” that producers (1) were not merely objecting to a regulation, but were suing to protect their definite personal rights and (2) did not have access to an administrative remedy). In this case, grower plaintiffs challenge the USDA’s authority to mandate treatment of almonds. In doing so, their fundamental concern is with the impact of the treatment regulation on their ability to sell their almonds in a niche organic market at a premium. ( See Am. Compl. ¶¶ 29-33.) Thus, plaintiffs are me rely objecting to a regulation rath er than asserting a definite personal right granted by the AMAA. 8 In Stark , the Supreme Court specifically recognized that not every loss would qualify as a de privation of a definite personal right of the producer. As the Court noted, “[t]he petitioners’ complain t is not that their blended price [ i.e. , the uniform minimum price less administrative deductions] is t oo low, but that the blended price has been reduced by a misapplication of money deducted from the producers’ minimum price.” 321 U.S. at 308-09; see also Benson v. Schofield , 236 F.2d 719, 722 (D.C. Cir. 1956) (“[A]ppellees to have standing in court, must show an injury or thr eat to a particular right of their own . . . . Mere loss of income in consequence of the action of Government or economic disadvantage, by itself, constitutes damnum absque injuria which does not confer stan ding.” (citation and internal quotation marks omitted)); Ark. Dairy Coop., Inc. v. USDA , 576 F. Supp. 2d 147, 155-56

8 As defendant points out, pl aintiffs’ claim (Opp’n at 8) that they have a definite personal right to “approve or veto marketing order provisions” is , in reality, a challenge to the Secretary’s authority to issue the treatment regulation as an administrative regulati on rather than as an amendment to the almond marketing order, wh ich would trigger the AMAA’s producer approval and public hearing requirements. (Reply at 11-12.) This cha llenge is not a uniquely producer claim.- 11 - (D.D.C. 2008) (holding that produc ers challenging an order that reduced the minimum prices dairy farmers receive under milk marketing orde rs were objecting to a regulation rather than asserting a definite personal right and therefore lacked standing), appeal docketed , No. 08-5406 (D.C. Cir. Sept. 19, 2008). Moreover, unlike Stark , an administrative remedy exists in this case since handlers can be expected to challenge the allege dly unlawful agency action. Ha ndlers, like growers, have an interest in receiving the highe st price for their almonds. 9 In fact, the almond treatment regulation, which plaintiffs allege is costly and lowers the value of their almonds in the organic market ( see Am. Compl. ¶¶ 29-35), imposes direct cost s only on handlers. “[T]he very presence of handlers as plaintiffs in the suit leads inexorably to the conc lusion that a suit by a producer is not necessary to ‘ensure the statute’s objectives will not be frustrated.’” Nw. Indep. Producers
Ass’n , 312 F. Supp. 2d at 27 (citing Community Nutrition , 467 U.S. at 352). CONCLUSION For the foregoing reasons, defendant’s motion to dismiss will be granted. A separate order accompanies this Memorandum Opinion.

/s/ ELLEN SEGAL HUVELLE United States District Judge Date: March 9, 2009

9 While, as plaintiffs assert, handler and grower interests can sometimes be antagonistic ( see Opp’n at 32) since handlers have an interest in paying the lowest price possible for almonds, both handlers and growers have the same interest in selling at the highest price.