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Avocados Plus Incorporated v. Veneman

June 18, 2004


Appeal from the United States District Court for the District of Columbia (02cv01798)

Before: Edwards, Randolph, and Tatel, Circuit Judges.

The opinion of the court was delivered by: Randolph, Circuit Judge

Argued May 13, 2004

The Hass Avocado Promotion, Research, and Information Act, 7 U.S.C. §§ 7801-7813, authorizes the Department of Agriculture to collect assessments from avocado growers and importers and to transfer the assessments to a board charged with promoting domestic consumption of avocados of the Hass variety. Two importers of avocados and two importers of avocado products sued in district court alleging that the Act violated their First Amendment right to be free of compelled speech.*fn1 The district court dismissed the complaint because the importers had not exhausted the administrative remedies the Act provides.


The Avocado Act, one of more than a dozen federal statutes aimed at promoting the sale of various agricultural commodities, requires the Secretary of Agriculture to issue an implementing order that takes effect if the majority of affected growers and importers approve it in a referendum. § 7805. The order establishes a Hass Avocado Board consisting of industry representatives. § 7804. The function of the Board is to "administer the order," § 7804(c)(1), "develop budgets for the implementation of the order," § 7804(c)(5), and "develop" and "implement plans and projects for Hass avocado promotion, industry information, consumer information, or related research[.]" § 7804(c)(5)-(6). The Board may not implement any budget, plan or project without the prior approval of the Secretary, but these are "deemed to be approved" if the Secretary does not act within 45 days. § 7804(d)(3).

The Act also requires the Secretary to impose assessments on growers and importers to pay for the Board's activities. § 7804(h). The Board must pay 85 percent of a grower's assessments to its state grower organization, if such an organization exists. § 7804(h)(8). If an importer belongs to an importers' association, the Board must pay 85 percent of its assessment to that group. § 7804(h)(9). The Board must also reimburse the Secretary for expenses incurred conducting the referendum and supervising the Board. § 7804(i). The rest of the money pays for Board programs, although at least some of it must fund a promotion program conducted by the California Avocado Commission. See § 7804(e)(1) (requiring Board to enter contract with "avocado organization ... in a State with the majority of Hass avocado production in the United States"); § 7801(a)(2) (stating that "virtually all domestically produced avocados for the commercial market are grown in the State of California").

Under the § 7806 of the Act, any "person subject to an order" may file a petition with the Secretary "stating that the order, any provision of the order, or any obligation imposed in connection with the order is not in accordance with the law; and ... requesting a modification of the order or an exemption from the order." § 7806(a)(1). The Secretary must rule on the petition after a hearing. § 7806(a)(3). The Act further provides that the "district courts of the United States ... shall have jurisdiction to review the ruling of the Secretary on the petition[,]" § 7806(b)(1), and must remand it if it "is not in accordance with law[.]" § 7806(b)(3).

Rather than invoking § 7806, the importers filed a complaint in district court claiming that the mandatory assessments were unconstitutional and seeking an injunction against enforcement of the Act.*fn2 The importers relied principally on United States v. United Foods, Inc., 533 U.S. 405 (2001), in which the Supreme Court ruled that an identical provision in the Mushroom Promotion, Research, and Consumer Information Act, 7 U.S.C. §§ 6101-6112, violated the free speech rights of mushroom growers by forcing them to pay for speech with which they disagreed.

The government had argued in United Foods that the mushroom promotion program was government speech, and that the government therefore could force growers to pay for it. The Supreme Court refused to consider the argument because the government had not raised it in the court of appeals. 533 U.S. at 416-17. United Foods triggered a series of challenges against other agricultural commodity promotion programs. In each case the government relied on the government speech defense and in each case the court of appeals rejected it. See Cochran v. Veneman, 359 F.3d 263 (3d Cir. 2004) (dairy); Michigan Pork Producers Ass'n v. Veneman, 348 F.3d 157 (6th Cir. 2003) (pork); Livestock Mktg. Ass'n v. USDA, 335 F.3d 711 (8th Cir. 2003), cert. granted, 2004 WL 303634 (May 24, 2004) (beef); s ee also Pelts & Skins, LLC v. Landreneau, 365 F.3d 423 (5th Cir. 2004) (striking down state alligator products promotion program); but see Charter v. USDA, 230 F. Supp. 2d 1121 (D. Mont. 2002) (sustaining beef program as government speech).

The avocado importers moved for a preliminary injunction. The government opposed the motion, arguing that the avocado program was government speech. The government also moved to dismiss the complaint for failure to exhaust administrative remedies. The district court initially addressed the importers' First Amendment claims, holding that they were not required to exhaust the administrative remedy provided in § 7806. Then, in response to a government motion, the court reconsidered its decision, ruled that importers must exhaust their administrative remedy, and dismissed the complaint for lack of subject matter jurisdiction.


The word "exhaustion" now describes two distinct legal concepts. The first is a judicially created doctrine requiring parties who seek to challenge agency action to exhaust available administrative remedies before bringing their case to court. See generally 2 RICHARD J. PIERCE, JR., ADMINISTRATIVE LAW TREATISE § 15.2 (4th ed. 2002). We will call this doctrine "non-jurisdictional exhaustion." Non-jurisdictional exhaustion serves three functions: "giving agencies the opportunity to correct their own errors, affording parties and courts the benefits of agencies' expertise, [and] compiling a record adequate for judicial review[.]" Marine Mammal Conservancy, Inc. v. Dep't of Agric., 134 F.3d 409 (D.C. Cir. 1998); McCarthy v. Madigan, 503 U.S. 140, 145-46 (1992).

Occasionally, exhaustion will not fulfill these ends. There may be no facts in dispute, see McKart v. United States, 395 U.S. 185, 198 n.15 (1969), the disputed issue may be outside the agency's expertise, see id. at 197-98, or the agency may not have the authority to change its decision in a way that would satisfy the challenger's objections, see McCarthy, 503 U.S. at 147-48. Also, requiring resort to the administrative process may prejudice the litigants' court action, see id. at 146-47, or may be inadequate because of agency bias, see id. at 148-49. In these circumstances, the district court may, in its discretion, excuse exhaustion if "the litigant's interests in immediate judicial review outweigh the ...

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