Koretoff v. Schaefer ( 2009 )

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, )
United States Department of Agriculture, )
)
Defendant. )
_________________________________________ )
MEMORANDUM OPINION
Plaintiffs, California almond growers and grower-retailers, brought suit against the
Secretary of the United States Department of Agriculture (“USDA”) to challenge a USDA
regulation requiring almond handlers to treat raw almonds in order to reduce the risk of
Salmonella bacteria contamination.1 In a Memorandum Opinion issued on March 9, 2009, the
Court granted defendant’s motion to dismiss. Koretoff v. Vilsack, 601 F. Supp. 2d 238 (D.D.C.
2009). Four grower-retailers have now moved, pursuant to Federal Rules of Civil Procedure
59(e) and 60(b)(3), for reconsideration and to alter or amend the Court’s judgment, and plaintiff
growers have moved, pursuant to Rule 59(e) only, for the same relief. For the reasons stated
herein, the Court will deny both motions.
1
The original suit also included almond handlers and grower-handlers. However, those
plaintiffs have not moved for reconsideration.
ANALYSIS
A Rule 59(e) motion may be granted if the court “finds that there is an intervening
change of controlling law, the availability of new evidence, or the need to correct a clear error or
prevent manifest injustice.” Firestone v. Firestone, 76 F.3d 1205, 1208 (D.C.Cir. 1996) (per
curiam) (citation and internal quotation marks omitted). Such motions “are disfavored and relief
from judgment is granted only when the moving party establishes extraordinary circumstances.”
Niedermeier v. Office of Baucus, 153 F. Supp. 2d 23, 28 (D.D.C. 2001). “A Rule 59(e) motion is
not a second opportunity to present argument upon which the Court has already ruled, nor is it a
means to bring before the Court theories or arguments that could have been advanced earlier.”
W.C. & A.N. Miller Cos. v. United States, 173 F.R.D. 1, 3 (D.D.C. 1997), aff’d sub nom. Hicks v.
United States, No. 99-5010, 1999 U.S. App. LEXIS 13376 (D.C. Cir. May 17, 1999).
Similarly, to prevail on a motion pursuant to Rule 60(b)(3), a plaintiff “must prove by
clear and convincing evidence some sort of fraud, misrepresentation or other misconduct.”
Martin v. Howard Univ., No. 99-1175, 2006 U.S. Dist. LEXIS 72303, at *8 (D.D.C. Oct. 4,
2006) (citation omitted); see also Summers v. Howard Univ., 374 F.3d 1188, 1192 (D.C. Cir.
2004).
I. Grower-Retailer Plaintiffs
The four grower-retailer plaintiffs contend that the Court erroneously concluded that they
were handlers and thus had to exhaust their administrative remedies. (See Grower-Retailers’
Mot. for Recons. at 3, 5-6.) However, according to plaintiffs, their complaint alleges that “(1)
The [Agricultural Marketing Agreement Act of 1937 (“AMAA”)], at 7 U.S.C. § 608c(13),
unequivocally proscribes regulation of any almond retailer in its retail capacity; and (2) the
Almond Order, by 7 C.F.R. § 981.13, and interpretive rules in § 981.413, places severe limits –
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by location, by sales venue, by method of sale, by customer, and by transaction volume – on
plaintiffs in their capacity as non-handler almond retailers.”2 (Id. at 2.)
2
Marketing orders promulgated pursuant to the AMAA regulate the activities of processors,
associations of producers, and others engaged in the handling of certain agricultural
commodities, known under the Act as “handlers.” 7 U.S.C. § 608c(1). They may not regulate
farmers in their capacity as producers (or growers) or retailers in their retail capacity (except for
retailers of milk and its products). See id. § 608c(13). Specifically, with respect to retailers, the
AMAA provides in pertinent part that “[n]o order issued under subsection (9) of this section
shall be applicable to any person who sells agricultural commodities or products thereof at retail
in his capacity as such retailer . . . .” Id. § 608c(13)(A). The almond marketing order and its
implementing regulations define the terms “handler” and “to handle” and provide additional
guidance concerning the retailer exemption as follows:
Handler means any person handling almonds during any crop year, except that
such term shall not include either a grower who sells only almonds of his own
production at retail at a roadside stand operated by him, or a person receiving
almonds from growers and other persons and delivering these almonds to a
handler.
7 C.F.R. § 981.13.
To handle means to use almonds commercially of own production or to sell,
consign, transport, ship (except as a common carrier of almonds owned by
another) or in any other way to put almonds grown in the area of production into
any channel of trade for human consumption worldwide, either within the area of
production or by transfer from the area of production to points outside or by
receipt as first receiver at any point of entry in the United States or Puerto Rico of
almonds grown in the area of production, exported therefrom and submitted for
reentry or which are reentered free of duty. However, sales or deliveries by a
grower to handlers, hullers or other processors within the area of production shall
not, in itself, be considered as handling by a grower.
Id. § 981.16.
The term at retail at a roadside stand as used in § 981.13 shall be defined to mean
sales for home use and not for resale which are not in excess of 100 pounds net
kernel weight to any one customer per day. Sales of almonds at certified farmers’
markets in compliance with section 1392 of the regulations of the California
Department of Food and Agriculture shall be construed as “roadside” sales for the
purpose of § 981.13 where these conditions are met.
Id. § 981.413.
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As the Court recognized in its original opinion, the issue here concerns a dispute between
plaintiffs and the USDA over the proper definition of various terms used in the AMAA.
Plaintiffs complain of the agency’s “expansive definition of handling” (Am. Compl. ¶ 91), which
they claim violates the AMAA by including certain retail activities. Thus, the Court found that
because the agency had labeled those who engage in such activities as “handlers” and thereby
subjected them to the almond marketing order, “plaintiffs are clearly bringing this challenge in
their capacity as handlers and must therefore first exhaust their administrative remedies.”
Koretoff, 601 F. Supp. 2d at 243 (citing United States v. Lamars Dairy, Inc., 500 F.2d 84, 85 (7th
Cir. 1974) (exhaustion required where defendants claim to have been incorrectly classified as
handlers)). Plaintiffs have not demonstrated any error in the Court’s finding.
While plaintiffs take issue with the Court’s statement that “[b]y their own admission, . . .
plaintiffs are only subject to the marketing order because they fit within the order’s definition of
handler,” Koretoff, 601 F. Supp. 2d at 243, the Court meant only that plaintiffs’ own statements
make clear that the gist of their complaint is a dispute over definitions contained in the almond
marketing order and its implementing regulations. (See Am. Comp. ¶¶ 91 -93 (alleging that the
USDA’s “expansive definition of handling,” in which the agency “purports to define and
regulate the handling of all California almonds sold in commerce for human consumption,
exempting only a grower’s production of almonds sold by the producer (grower) at his retail
farm stand,” had “limited or precluded plaintiff producers (growers) from selling their
production in retail sales” in violation of the AMAA and requesting a declaratory judgment to
that effect); see also Declaration of Mark McAfee at ¶ 7 (acknowledging that “[w]ith the USDA
[almond treatment] Rule in place, I cannot expand my retail operation without investing in the
treatment of my almonds” and that the Almond Board had “threatened to cite me and fine me for
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violation of the regulation”) (attached to Grower-Retailers’ Mot. for Recons.).) Contrary to
plaintiffs’ assertion, the Court did not find that plaintiffs are handlers, but merely recognized that
their falling within the USDA’s definition of “handler” provides the basis for the agency’s
regulatory power over them.
That plaintiffs now contend that they have refrained from engaging in certain retail
activities that the USDA has defined as handling does not change the outcome. The fact remains
that should plaintiffs choose to engage in these activities, they would be subjected to the almond
treatment regulation because the agency would define them as handlers, in which case they
would be required to proceed initially before the agency. See Lamars Dairy, Inc., 500 F.2d at
85; United States v. Country Lad Foods, Inc., 327 F. Supp. 395 (N.D. Ga. 1971); United States v.
Hinman Farms Prods., Inc., 156 F. Supp. 607, 610-11 (N.D.N.Y. 1957). Plaintiffs cannot avoid
this exhaustion requirement by claiming that they are not handlers because they refuse to engage
in agency-defined handling activities in order to avoid regulation.3 To permit plaintiffs to skirt
the exhaustion requirement in this way would “undermine the congressional preference for
administrative remedies and provide a mechanism for disrupting administration of the
congressional scheme.” Block v. Community Nutrition Institute, 467 U.S. 340, 352 (1984).
Moreover, the Court rejects plaintiffs’ claim that “the Secretary’s contention that he can
equate ‘retailing’ with ‘handling’” “prematurely argues the legal merits of the case.” (Grower-
Retailers’ Reply at 5.) In fact, it is plaintiffs who seek to have the Court, without the benefit of
the USDA’s expertise, decide whether the agency can draw the line between retail and handling
3
Plaintiffs claim that they cannot obtain administrative review because they are not handlers.
(Grower-Retailers’ Reply at 6-7.) However, nothing prevents plaintiffs from engaging in activity
they deem retail, but which the agency deems handling, and, as defendant points out, requiring
plaintiffs to do so in order to complain about the regulation of these activities is not manifestly
unjust. (See Def.’s Opp’n to Grower-Retailers’ Mot. for Recons. at 10.)
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activities as it has done. As the Supreme Court has recognized, “[t]he regulation of agricultural
products is a complex, technical undertaking. Congress channelled disputes concerning
marketing orders to the Secretary in the first instance because it believed that only he has the
expertise necessary to illuminate and resolve questions about them.” Community Nutrition, 467
U.S. at 347. Therefore, the Court remains convinced that plaintiffs must first present their claims
to the agency.
II. Grower Plaintiffs
The almond grower plaintiffs move for reconsideration based on the following three
alleged errors: (1) the conclusion that growers lack standing; (2) the conclusion that growers’
claims are statutorily precluded; and (3) the conclusion that “the almond growers’ interests are
‘necessarily’ or ‘inexorably’ the same as, or converged with, those of handler plaintiffs.”
(Growers’ Mot. for Recons. at 1-2.)
In its prior opinion, this Court found, based on Community Nutrition, that judicial review
of marketing orders must ordinarily be confined to suits by handlers and that growers’ claims
were “impliedly precluded” based on “inferences of intent drawn from the statutory scheme as a
whole.” See Koretoff, 601 F. Supp. 2d at 243-44 (quoting Community Nutrition, 467 U.S. 340 at
349). Nevertheless, the Court noted that the Supreme Court, in Stark v. Wickard, 321 U.S. 288(1944), had recognized a narrow exception to the rule. While the Court described the holding in
Stark in terms of standing rather than statutory preclusion, it nevertheless recognized that the
decision turned on the fact that “producers were alleging injury to their ‘definite personal rights’
that were ‘not possessed by the people generally’” and the fact that no other forum existed to
challenge the Secretary’s actions because handlers, who had no financial interest in the producer
settlement fund at issue in Stark, could not question its use. Koretoff, 601 F. Supp. 2d at 244
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(quoting Stark, 321 U.S. at 302). Applying these standards to grower plaintiffs in this case, the
Court concluded that they were not asserting a definite personal right guaranteed by the AMAA
and that an administrative remedy existed since handlers could challenge the allegedly unlawful
agency action. Id. at 244-45. Thus, growers were precluded from bringing suit.
As an initial matter, the Court notes that plaintiffs raise no new arguments to rebut these
conclusions, but simply rehash arguments that were previously rejected by the Court. Therefore,
they have established no basis for reconsideration. See W.C. & A.N. Miller Cos., 173 F.R.D. at
3. In any event, plaintiffs have failed to demonstrate any error in the Court’s articulation of the
relevant legal standards or its conclusions based on those standards. First, while plaintiffs
attempt to read Stark broadly to permit all producer suits (see Growers’ Mot. for Recons. at 5;
Growers’ Reply at 3), as the D.C. Circuit has recognized, “Stark was a limited holding that
turned on the unique circumstances of that case.” Edaleen Dairy, LLC v. Johanns, 467 F.3d
778, 782 (D.C. Cir. 2006). In Edaleen, the D.C. Circuit explained that
the direct right of action that was allowed in Stark turned on two key factors.
First, the Court emphasized that the producers were not merely objecting to a
regulation; rather, they were suing to protect their ‘definite personal rights’ in the
settlement pool fund. Id. at 308 (“It is because every dollar of deduction comes
from the producer that he may challenge the use of the fund.”). Second, the Court
stated that these producers were able to sue directly in district court because they
did not have access to an administrative remedy under the AMAA. Overall, while
handlers are always required to exhaust their administrative remedies prior to
seeking judicial review, producers may be able to avoid the exhaustion
requirement if they are suing to protect ‘definite personal rights’ for which there
is no access to an administrative remedy.
Id. at 782-83 (citations omitted). In this case, grower plaintiffs are objecting to the almond
treatment regulation rather than suing to protect any definite personal right granted by the
AMAA. See Koretoff, 601 F. Supp. 2d at 244. Thus, they may not seek judicial review.
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Moreover, Stark was based on the fact that producers, the only parties with an interest in
the settlement fund, were the only ones who could challenge the allegedly unlawful agency
action.
‘[Handlers] [could not] question the use of the fund, because handlers had no
financial interest in the fund or its use.’ Thus, there was ‘no forum’ in which this
aspect of the Secretary’s actions could or would be challenged. Judicial review of
the producers’ complaint was therefore necessary to ensure achievement of the
Act’s most fundamental objectives – to wit, the protection of the producers . . . .
Community Nutrition, 467 U.S. at 351-52 (citations omitted). Thus, because the producers’
interest in Stark could not be protected by the statutory provisions authorizing suits by handlers,
the Supreme Court concluded that Congress could not have intended to preclude such producer
suits. By contrast, as this Court recognized in its prior opinion, handlers in this case can
challenge (and, in fact, have done so here) the almond treatment regulation.4 See Koretoff, 601
F. Supp. 2d at 245.
Plaintiffs challenge the Court’s view of the cases, contending that “[t]he controlling
standard for claim preclusion . . . is whether Congress intended ‘to protect the interests of the
class’ to which a plaintiff belongs.” (Growers’ Reply at 3 (quoting Barlow v. Collins, 397 U.S.
4
While plaintiffs characterize the Stark opinion as having been premised on the fact that the
producers there claimed, as growers do here, that the Secretary lacked the statutory authority to
enact the challenged marketing order provisions (see Growers’ Mot. for Recons. at 5; Growers’
Reply at 3), in fact, Stark acknowledged producers’ claim in making its point that the right to
judicial review was the only way to ensure that producers’ definite personal rights in the
producer settlement fund would be protected. Specifically, the Court noted that producers’ only
opportunity to complain about the contested deduction to the settlement fund was to appear at a
hearing and to vote for or against the proposed marketing order requiring the deduction. Stark,
321 U.S. at 307. However, because the producers complained that contested provisions of the
order were beyond the Secretary’s delegated powers, the Court noted that an opportunity to be
heard and to vote “cannot protect minority producers against unlawful exactions which might be
voted upon them by majorities.” Id. Thus, absent judicial intervention, the validity of the
Secretary’s action could not be challenged. See id. at 308-09. By contrast, in the instant case,
the validity of USDA’s enactment of the almond treatment regulation can be challenged by
handlers both administratively and thereafter in court.
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159, 167 (1970)).) Thus, plaintiffs argue that, pursuant to Stark, producers may always
challenge allegedly unlawful agency action. The Court, however, rejects this view as
inconsistent with both Edaleen and Community Nutrition.
Grower plaintiffs also argue that handlers cannot protect their interests. In doing so, they
attempt to distinguish their specific injuries from those of handlers. (See Growers’ Mot. for
Recons. at 11.) The Court, however, did not hold that grower and handler injuries were
identical, merely that both parties have a similar interest in receiving the highest price for
almonds. Koretoff, 601 F. Supp. 2d at 245; see also Community Nutrition, 467 U.S. at 352(noting that because handlers and consumers are both “interested in obtaining reliable supplies of
milk at the cheapest possible prices,” handlers could be expected to challenge unlawful USDA
action). (See Am. Compl. ¶¶ 31, 34-35 (noting that almond treatment regulation has resulted in
reduced returns for growers and in handlers being “functionally shut . . . out” of the organic
market and having to sell almonds to consumers at severe discounts).) While the precise nature
of their alleged injuries may not be the same, what is clear is that both growers and handlers
perceive adverse effects from the almond treatment regulation such that both groups have an
interest in challenging the authority of the USDA to adopt the regulation.
In addition, growers argue that their claims are unique because they alone are the ones
who granted the Secretary authority to enact limited quality control regulations, and only they
possess the right to approve amendments to the almond marketing order. (See Growers’ Mot. for
Recons. at 11; Growers’ Reply at 5-6.) It is unclear, however, how either of these factors
negatively impacts the ability of handlers to challenge the almond treatment regulation. While
growers seek to cast doubt on the ability of handlers to challenge the USDA’s failure to obtain
grower approval of the treatment regulation, it is unclear why handlers would be unable to
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challenge the procedures the agency used to enact the regulation if, in fact, these procedures
were incorrect. Moreover, growers’ attempts to analogize their situation to cases dealing with
vicarious liability, intervention under Fed. R. Civ. P. 24(a), and class actions are inapposite, as
this case involves none of those issues, and neither Stark nor Community Nutrition relied on
those standards.
Accepting plaintiffs’ arguments would lead to the anomalous result that handlers would
be required to challenge the almond treatment regulation before the agency prior to bringing suit,
while growers could proceed directly to court. It is unlikely that Congress intended such a result.
See Community Nutrition, 467 U.S. at 347 (“Respondents would have us believe that, while
Congress unequivocally directed handlers first to complain to the Secretary that the prices set by
milk market orders are too high, it was nevertheless the legislative judgment that the same
challenge, if advanced by consumers, does not require initial administrative scrutiny. There is no
basis for attributing to Congress the intent to draw such a distinction.”) Thus, the Court
concludes that plaintiff growers have failed to demonstrate any error or manifest injustice in the
Court’s prior ruling.
CONCLUSION
For the foregoing reasons, the motions for reconsideration of almond grower-retailer
plaintiffs and almond grower plaintiffs will be denied. A separate order accompanies this
Memorandum Opinion.
/s/
ELLEN SEGAL HUVELLE
United States District Judge
Date: June 17, 2009
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