Opinion ID: 776504
Heading Depth: 2
Heading Rank: 4

Heading: Pescosolido v. Block

Text: 19 Our circuit has read Stark and Community Nutrition to provide a narrow exception for producers seeking judicial review. In Pescosolido v. Block, 765 F.2d 827 (9th Cir.1985), we held that Stark is limited to situations in which producers claim that some `definite personal right' granted by the statute is being infringed by the Secretary acting outside the scope of his delegated authority, with no handler having standing to protest. Id. at 832. In discussing the last phrase involving the standing of handlers, this court reasoned that Stark allowed producers to sue only where their interests were not represented by those of handlers, i.e. where handlers would have no interest and would, therefore, not challenge the Secretary's actions. Id. This reading is consistent with the Supreme Court's holding in Community Nutrition, where the Court considered the interests of the parties involved and found that consumers' interests are similar to those of handlers and that, therefore, actions affecting consumers would also affect handlers who would take steps to challenge those decisions. 20 We find that the record here supports the district court's holding that the producers are precluded from seeking judicial review because their interests are adequately represented by the handlers. As the district court noted, the exemption injures producers by reducing the blend price and it injures handlers by providing a competitive advantage to producer-handlers. A letter addressed to the Dairy Division Director, Richard McKee, by the law firm representing UDA, Shamrock Farms, Shamrock Foods, and Agri-Mark, Inc., supports this conclusion. The pertinent part of the letter states: 21 With the expansion of producer-handler distribution into channels of commerce in direct competition with fully regulated handlers, it is apparent that handlers adversely affected by significant producer-handler competition are no longer willing to accept minimum pricing regulation under a system from which one or more of their major competitors are exempt. Producers who are the intended beneficiaries of the regulatory system are also affected by the exemption. Expansion of the producer-handler share of the market's Class I sales not only reduces producer returns; it poses the long-term threat of a breakdown of the regulatory system. 22 While legislative history may support exemption from pricing and pooling of producer-handlers who qualify as small businesses with a de minimus effect on the market, legislative history cannot be invoked to overcome the command of § 8c(5)(C) of the AMAA which requires that the minimum pricing and pooling provisions of the orders be applied to all handlers (including producers who are also handlers). We have previously brought to the attention of the Dairy Division judicial decisions which confirm the authority of the Secretary to fully regulate handlers with respect to the marketing of milk of their own production. We believe that those decisions, coupled with equal protection principles of the Constitution, compel the Secretary to extend to producer-handlers the same regulatory obligations as are imposed on other handlers with whom they compete. 23 It is evident that the distributor (or handler) element of the dairy businesses in this case has a significant interest in pursuing Sara Farms and their exempt status. Unlike in United States v. Rock Royal Coop., Inc., 307 U.S. 533, 560-61, 59 S.Ct. 993, 83 L.Ed. 1446 (1939), and Stark, the non-exempt handlers here have standing because of their expressed financial interest that is being affected by the dairy division's application of the producer-handler exemption. See Stark, 321 U.S. at 308, 64 S.Ct. 559. 24 Allowing the plaintiffs in this case to seek judicial review when they are also handlers (such as UDA) or are associated with handlers (such as Shamrock Foods) who have an interest in ensuring that the producer-handler exemption is valid and not unjustly enforced, allows handlers to evade the statutory requirement that they first exhaust their administrative remedies. Such a result would undermine Congress' intent to establish an equitable and expeditious procedure for testing the validity of orders. Community Nutrition, 467 U.S. at 348, 104 S.Ct. 2450 (internal quotation marks omitted). Even though the Second Circuit in Dairylea reluctantly concluded that Dairylea was a producer that was not required to exhaust any administrative remedies, it further observed that [c]onsidering the complicated nature of the provisions of the Act and the labyrinthian regulations issued thereunder, it would be most appropriate for Dairylea's complaint to be considered first by the Secretary, who possesses the facilities and the expertise to review and interpret the Act and regulations herein involved. 504 F.2d at 82. We agree with that assessment of the Act. This case is the perfect example of when a party should first exhaust administrative remedies before judicial review. 25 Appellants note that other circuits have allowed producers to seek judicial review. See Minnesota Milk Producers Ass'n v. Madigan, 956 F.2d 816 (8th Cir.1992); Farmers Union Milk Mktg. Coop. v. Yeutter, 930 F.2d 466 (6th Cir.1991) (involving a location adjustment amendment to a milk marketing order that created a fight between two different groups of dairy farmers). These courts have held that an examination of the overall structure of the Act is necessary to determine if judicial review is necessary. See, e.g., Minnesota Milk Producers, 956 F.2d at 818. In Minnesota Milk Producers, the court held that the producers had standing to seek judicial review because the handlers did not have a reason to challenge the Secretary's orders, the producers were asserting a definite, personal right, and the producers did not have authority under the Act to vote for repeal of the orders they were challenging because the orders covered production areas in which they were not producers. Id. 26 We do not find these circuit cases persuasive based on the facts of our case. Unlike in Minnesota Milk Producers, the non exempt handlers governed by Order 131 have explicitly stated in the letter sent by their counsel to the dairy division that they are affected by the producer-handler exemption and are seeking to challenge the Secretary's application of the exemption. In addition, the producers had the authority to vote for repeal of the order they are challenging. Before any market order may become effective, it must be approved by at least two-thirds of the affected dairy producers. 7 U.S.C. § 608c(8), 608c(5)(B)(i). The Secretary may impose the order without receiving approval of the handlers of at least 50% of the volume of milk covered by the order, but the Secretary cannot proceed with the producers' consent. 7 U.S.C. § 608c(9)(B). 27 The Supreme Court in Stark allowed the producers to seek judicial review because if it did not there would be no forum — either administrative or judicial — in which the Secretary's actions could have been challenged. 321 U.S. at 309, 64 S.Ct. 559. In this case, unlike in Stark, the Secretary's actions can be challenged in the administrative forum by the handlers who have a financial interest in the manner in which the producer-handler exemption is being applied. The record before us supports this conclusion.