Arkansas Dairy Cooperative Ass'n v. United States Department of Agriculture

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 7, 2009 Decided July 24, 2009

No. 08-5406

ARKANSAS DAIRY COOPERATIVE ASSOCIATION, INC., ET AL.,

APPELLANTS

v.

UNITED STATES DEPARTMENT OF AGRICULTURE, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:08-cv-01426-EGS)

Benjamin F. Yale argued the cause for appellants. With him

on the briefs was Ryan K. Miltner.

John H. Vetne and Steven J. Rosenbaum argued the cause

for appellees Agri-Mark, Inc., et al. and International Dairy

Foods Association. Susan C. Silber entered an appearance.

Kelsi Brown Corkran, Attorney, U.S. Department of Justice,

argued the cause for federal appellee. With her on the brief

were Gregory G. Katsas, Assistant Attorney General, and

Michael S. Raab, Attorney.

Before: ROGERS, TATEL and GRIFFITH, Circuit Judges.

2

Opinion for the Court by Circuit Judge ROGERS.

Opinion by Circuit Judge GRIFFITH dissenting in part and

concurring in the judgment in part.

ROGERS, Circuit Judge: The Secretary of Agriculture

establishes formulas to calculate the minimum prices that dairy

handlers (processors, manufacturers, and distributors) must pay

dairy producers (farmers) for milk. 7 U.S.C. § 608c(5). As part

of those formulas, the Secretary sets “make allowances,” which

represent the costs to handlers in making certain forms of dairy

products. In July 2008, the Secretary promulgated an interim

rule amending milk marketing orders to increase make

allowances, thereby reducing the minimum price paid to

producers. Several producers and producer cooperatives

challenged the increases principally on the ground that the

Secretary had failed to determine and consider their food and

fuel costs, which they maintain was required by the Agricultural

Marketing Agreement Act (“AMAA”), 7 U.S.C. §§ 601, et seq.

The district court ruled the producers lacked standing for want

of a cause of action and, alternatively, denied their motion for a

preliminary injunction. We hold that the producers have

standing to challenge the interim rule under the Administrative

Procedure Act and that the Secretary was obliged under the

AMAA to consider their feed and fuel costs. Because the

Secretary met that obligation, however, the producers fail to

show likelihood of success on the merits, and we affirm the

denial of injunctive relief. Furthermore, in reaching that

decision, we hold certain of their claims must be dismissed.

I.

The milk industry is highly regulated by the Secretary of

Agriculture pursuant to the Agricultural Marketing Agreement

Act of 1937, 7 U.S.C. §§ 601, et seq. (“AMAA”). See Hettinga

3

v. United States, 560 F.3d 498, 501 (D.C. Cir. 2009). At least

two factors create variations in the supply and demand of milk.

First, the dairy market values milk more highly when sold in

fluid form than when used for dairy products like butter or

cheese, which would encourage dairy farmers in an unregulated

market to sell their milk for the premium fluid prices. See Zuber

v. Allen, 396 U.S. 168, 172-73 (1969). Second, cows naturally

produce more milk in the spring and summer, such that a herd

size sufficient to generate an adequate supply during the fall and

winter generates surpluses during the spring and summer,

leading to the potential for further price swings in an

unregulated market. See id. To prevent “destabilizing

competition” among dairy farmers as a result, Congress enacted

the AMAA. Block v. Cmty. Nutrition Inst., 467 U.S. 340, 341-

42 (1984). “The ‘essential purpose [of the scheme put in place

by the AMAA is] to raise producer prices,’ and thereby to

ensure that the benefits and burdens of the milk market are fairly

and proportionately shared by all dairy farmers.” Id. (quoting S.

REP. NO. 74-1011, at 3 (1935)).

The AMAA and its implementing regulations use two

regulatory mechanisms: price fixing and payment pooling. The

minimum prices that handlers must pay vary according to the

end use of the milk, as categorized in four classes. See 7 U.S.C.

§ 608c(5)(A); 7 C.F.R. § 1000.40 (Class I milk is sold in fluid

form, Class II milk is used to make ice cream, soft cheeses, and

related products, Class III milk is used to produce harder

cheeses, and Class IV milk is used to make butter and related

products.). Instead of setting specific prices to be paid for each

Class, the Secretary has established a formula by which the price

for each Class is determined monthly based on the average

nationwide wholesale prices from the previous month. See 7

C.F.R. § 1000.50; Milk in the Northeast and Other Marketing

Areas; Notice of Proposed Rulemaking and Tentative Partial

Final Decision, 73 Fed. Reg. 35,306, 35,308 (June 20, 2008)

4

(“Tentative Decision”). The formulas for Class III and IV milk

are based on the nationwide average prices for butter, nonfat dry

milk, cheese, and dry whey, minus a set dollar amount for each

of those products, multiplied by a “yield factor.” 7 C.F.R. §

1000.50)(l)-(o). Class I and II prices are derived from the Class

III and IV prices but Class I prices are adjusted for the location

of the handler so that handlers pay different prices in different

geographic areas. See 7 C.F.R. §§ 1000.50, 1000.52. The

amounts subtracted from the average sale prices of Class III and

IV products, known in the milk industry as “make allowances”

or “manufacturing allowances,” are intended to represent the

costs to the handlers of making the end dairy products from raw

milk. Tentative Decision, 73 Fed. Reg. at 35,308. In essence,

handlers retain from the average wholesale price the amount set

by the make allowance and transfer the balance to producers.

The second major component of dairy market regulation is

payment pooling. Under this system, handlers pay prices

according to the end use of milk, but all the producers in a

geographic area receive the same monthly average or “blended”

price per unit of milk sold, regardless of the use to which their

milk is put. See 7 U.S.C. § 608(c)(5)(B); 7 C.F.R. §§ 1000.70,

1000.76. This payment equalization is accomplished through

the “producer settlement fund” into which handlers pay, or from

which handlers withdraw, according to whether their blend-price

payments to producers are less or greater than the end-use-value

of the milk they have purchased. C.F.R. §§ 1000.70, 1000.76.

Again, the effect of this regime is that handlers make payments

which vary according to the market value of the milk they use

(as reflected in minimum prices), while all producers in an area

receive the same average, or blended, price per unit of milk.

Different geographic areas of the United States are

regulated under slightly different conditions, although the

formulas used to set prices of Class III and IV milk are the same

5

in all areas. See 7 C.F.R. § 1000.50. Each of eleven areas,

generally known as a “marketing area” or “milk marketing

area,” is governed by a different “Order” of the Secretary. See,

e.g., 7 U.S.C. § 608c(5)(A); 7 C.F.R. § 1001.2. Before going

into effect, the Secretary’s orders must be approved by two-

thirds of the producers or the producers of two-thirds of the milk

volume in the affected area, as well as by the handlers of a

majority of the milk volume in the area covered by the order,

although the Secretary can put an order into effect without

handler approval if the order is “the only practical means of

advancing the interests of the producers.” 7 U.S.C. § 608c(8)-

(9).

Make allowances, unlike the wholesale prices used in the

minimum price formulas for Class III and IV products, do not

vary with market conditions. They are set as constants in a

formula and can only be raised or lowered through a

rulemaking. Tentative Decision, 73 Fed. Reg. at 35,323.

Several events converged to shape the issues in the instant case.

First, in January 2006, the Secretary issued notice of a hearing

on a proposal in which the handler Agri-Mark advocated an

increase in make allowances. See Milk in the Northeast and

Other Marketing Areas; Notice of Hearing on Proposed

Amendments to Tentative Marketing Agreements and Orders, 71

Fed. Reg. 545 (Jan. 5, 2006). In December 2006, after a hearing

and the required producer approval, the Secretary promulgated

an interim final rule increasing the make allowances. See Milk

in the Northeast and Other Marketing Areas; Interim Order

Amending the Orders, 71 Fed. Reg. 78,333 (Dec. 29, 2006). A

number of producers sought an injunction in the district court for

the Northern District of Ohio, on the ground that the Secretary

had failed to consider their feed prices and feed supplies when

adjusting the make allowance, as they argued was required by

the AMAA, 7 U.S.C. § 608c(18), infra note 7. The district court

set forth conflicting interpretations, noting, for example, that the

6

Sixth Circuit had held in Lansing Dairy, Inc. v. Espy, 39 F.3d

1339, 1355 (6th Cir. 1994), that the statute and legislative

history were ambiguous. The district court found it unnecessary

to decide whether § 608c(18) required the Secretary to consider

such feed costs when amending make allowances because the

Secretary’s final decision showed he had, in fact, “given [these

factors] appropriate consideration” under the product-price

formulas. Bridgewater Dairy, LLC v. USDA, No. 3:07-cv-104,

2007 WL 634059, at *4-6 (N.D. Ohio Feb. 22, 2007).

Second, in 2008 Congress amended the AMAA to require

the Secretary, as “part of any hearing” to adjust make

allowances, to “determine” and “consider” producers’ feed and

fuel costs.1 See 2008 Act, Pub. L. 110-246, § 1504, 122 Stat at

1721-72 (codified at 7 U.S.C. § 608c(17)(G)), see page 22. The

amendment addressed ambiguities in § 608c(18) noted by the

district court in Bridgewater Dairy. Under the amendment, the

requirement to consider producers’ costs explicitly applied when

the Secretary was adjusting make allowances, and the Secretary

was required to consider recent price in determining producers’

monthly costs in the market area.

Third, the Secretary, on June 20, 2008, after a series of

hearings, proposed further increases in make allowances and

changes in the butter fat yield factor used in Class III and Class

1

On May 22, and June 18, 2008, Congress enacted two

statutes, together known as the Food, Conservation, and Energy Act

of 2008, Pub. L. 110-234, 122 Stat. 923; Pub. L. No. 110-246, 122

Stat. 1651 (“2008 Act”). Section 1504 of Pub. L. No. 110-246, which

contains the requirement relevant in the instant case, became effective

on the earlier of its enactment or the enactment of “H.R. 2419 of the

110th Congress.” See 2008 Act § 4(b), 122 Stat. at 1664. H.R. 2419,

which became Pub. L. No. 110-234, was enacted earlier, on May 22,

2008. See 2008 Act, 122 Stat. at 923.

7

IV product-price formulas on an interim basis. Tentative

Decision, 73 Fed. Reg. 35,323.2 As relevant, the Secretary

found that handlers’ costs had increased since the make

allowances were last set. Id. at 35,324. The Secretary pointed

out that “because make allowances account for manufacturing

costs in the Class III and Class IV price formulas but do not

change as those costs change, increasing make allowances is the

only reasonable way by which those increased costs can be

recovered,” id. at 35,323. The Secretary also cited testimony

indicating that a 2006 study had attempted to correct the

understatement of processing costs in a 2005 study used in the

previous rulemaking, and the 2006 study showed the need to

update make allowances to reflect changes in manufacturing

costs. Id. at 35,309. The Secretary proposed increased make

allowances for Classes III and IV based on national

manufacturing cost averages. Id. at 35,325–26. In the course of

the rulemaking, the Secretary addressed a number of objections

from producers, including that make allowances were already

set too high and that producers have also seen increased costs

due to higher energy and feed costs. Id. at 35,324. The

Secretary responded that objections based on producer costs “are

not valid arguments for opposing how make allowance should

be determined or what levels make allowances need to be,”

because current make allowances were not reflective of

handlers’ costs and, unlike producers’ costs, could not be

recaptured in the marketplace. Id.

After producer approval of the Tentative Decision, the

Secretary promulgated an interim rule amending milk marketing

2

The Secretary explained in promulgating an interim rule

that “[a] separate decision [will address] the collection of

manufacturing cost information, the use of an energy cost adjustor and

providing for a cost add-on feature to Class III and Class IV product-

pricing formulas . . . ..” Tentative Decision, 73 Fed. Reg at 35,306.

8

orders to increase the make allowances. See Milk in the

Northeast and Other Marketing Areas; Interim Order Amending

the Orders, 73 Fed. Reg. 44,617 (July 31, 2008) (“Interim

Rule”). The required majority of handlers did not approve, but

the Secretary exercised his override authority on the ground that

the Interim Rule was necessary to effect the policy of the

AMAA of advancing producer interests. Id. at 44,618. Neither

the Tentative Decision nor the Interim Rule explicitly addressed

the requirements of the 2008 Act.

Two weeks later, appellant-producers sued the Department

of Agriculture, seeking declaratory and injunctive relief on the

ground that the Interim Rule was arbitrary, capricious, and

contrary to law, not supported by substantial evidence, and

constituted a denial of substantive due process. The producers

premised the district court’s jurisdiction on the AMAA,

including the amendment in the 2008 Act, and the

Administrative Procedure Act (“APA”), 5 U.S.C. § 701, et seq.

They alleged that the Interim Rule would have an adverse

“direct, penny for penny, impact on the prices” producers would

receive for their milk, specifically that it would lead to a

“permanent loss of income.” Compl. ¶¶ 15-17, 26. Among

other grounds, they argued the Secretary had failed to determine

and consider their feed and fuel costs as required by the AMAA

under §§ 608c(17)(G) and 608c(18). They also filed a motion

for a temporary restraining order and/or preliminary injunction.

The district court ruled the producers lacked standing

because the AMAA impliedly precluded APA review, and thus

they had no cause of action. Ark. Dairy Coop., Inc., v. USDA,

576 F. Supp. 2d 147, 154 (D.D.C. 2008). Alternatively, the

district court denied their motion for a preliminary injunction,

assuming the motion was properly before it, on the grounds that

the producers had little chance of success on the merits because

§ 608c(18) did not require the Secretary to consider feed and

9

fuel costs when adjusting a make allowance; the requirement in

§ 608c(17)(G) did not go into effect until after the hearing on

proposals resulting in the Secretary’s Tentative Decision had

concluded; and the Secretary had in fact determined and

considered producer costs by using product-pricing formulas

that accounted for those factors. Id. at 156-60.

II.

The producers appeal, see 28 U.S.C. § 1292(a)(1),

contending they have demonstrated their entitlement to a

preliminary injunction of the Interim Rule. They contend they

have a judicially protectable right in the benefits guaranteed by

the AMAA and that the Secretary failed to comply with §

608c(17)(G) mandating the determination and consideration of

their feed and fuel costs in adjusting make allowances, and §

608c(18) mandating the consideration of the enumerated

economic factors in each marketing area. They further contend

they have demonstrated irreparable harm and that an injunction

in their favor is in the public interest in preventing unauthorized

administrative action and direct injury to them.

In deciding whether to grant a preliminary injunction, the

district court must evaluate whether: (1) the plaintiff has a

substantial likelihood of success on the merits; (2) the plaintiff

would suffer irreparable injury were an injunction not granted;

(3) an injunction would substantially injure other interested

parties; and (4) the grant of an injunction would further the

public interest. Serono Labs., Inc. v. Shalala, 158 F.3d 1313,

1318 (D.C. Cir. 1998). This court “review[s] the district court’s

weighing of the preliminary injunction factors under the abuse

of discretion standard, and its findings of fact under the clearly

erroneous standard. To the extent the district court’s decision

hinges on questions of law, however, this court’s review is

essentially de novo.” Id. at 1318 (citations and internal

10

quotations omitted). There are three such questions here: (1)

whether the producers have a cause of action under the APA and

thus have standing; (2) if so, whether the Secretary’s statutory

obligations are as the producers contend; and (3) if so, whether

the Secretary complied with those obligations in promulgating

the Interim Rule.

The threshold issue is whether the producers have a cause

of action by which they can challenge the Interim Rule

amending the Secretary’s milk marketing orders to increase

make allowances. Our inquiry here is not whether the producers

have standing under Article III of the Constitution, which is

undisputed and clear, but whether Congress has provided for or

precluded judicial review. See Steel Co. v. Citizens for a Better

Env’t, 523 U.S. 83, 96-97 (1998).

The AMAA provides for handlers to petition for judicial

review of the Secretary’s orders after exhausting their

administrative remedies.3 No provision of the AMAA provides

3

Section 608(c)(15) provides:

(A) Any handler subject to an order may file a written

petition with the Secretary of Agriculture, stating that such

order . . . is not in accordance with law and praying for a

modification thereof or to be exempted therefrom. He shall

thereupon be given an opportunity for a hearing . . . . After

such hearing, the Secretary shall make a ruling upon the

prayer of the petition which shall be final, if in accordance

with law.

(B) The District Court[s] . . . in any district in which

such handled is an inhabitant, or has his principal place of

business, are hereby vested with jurisdiction in equity to

review such ruling . . . .

11

for judicial review by producers. However, the producers also

bring their claims under the APA, which provides judicial

review to persons “suffering legal wrong because of [final]

agency action, or adversely affected or aggrieved by [final]

agency action within the meaning of a relevant statute,” 5 U.S.C.

§§ 702, 704, except where such review precluded by statute, id

§ 701(a)(1). The Department and some intervenor producer-

handlers maintain the AMAA is such a statute, relying on Block

v. Community Nutrition Institute, 467 U.S. 340 (1984). The

district court agreed. Ark. Dairy, 576 F. Supp. 2d at 154-55.

Such an approach, however, reads Block too broadly and Stark

v. Wickard, 321 U.S. 288 (1944), on which the producers rely,

too narrowly, and thus fails to conform to this court’s precedent

on producer standing.

In Block, individual milk consumers challenged a milk

marketing order that had the effect of raising the price

consumers would pay for reconstituted milk. Id. at 343-44. The

Supreme Court held the consumers lacked standing to challenge

the order. Id. at 352-53. The Court instructed that in

determining whether a statute “precludes judicial review,” a

court must examine not only the statutory text, “but also . . . the

structure of the statutory scheme, its objectives, its legislative

history, and the nature of the administrative action involved,” id.

at 346, under a general presumption in favor of judicial review

which “may be overcome by specific language or specific

legislative history that is a reliable indicator of congressional

intent,” id. at 349. Employing this structural analysis, the Court

focused on the fact that the AMAA explicitly provides handlers,

but not consumers, a right to petition for review in court. The

AMAA’s “statutory scheme . . . [thus] makes . . . clear

7 U.S.C. § 608(c)(15).

12

Congress’ intention to limit the classes entitled to participate in

the development of market orders.” Id. at 346.

Because the AMAA does not provide a right of judicial

review to producers, the Department seizes on Block as

precluding producer standing in a cause of action under the APA

as well. However, this approach reads Block too broadly, for the

Supreme Court did not concentrate simply on the presence or

absence of an explicit right of appeal in the AMAA, but instead

noted that in the “complex scheme” of the AMAA, there was no

provision for consumer participation of any kind. Id. “The

omission of such a provision is sufficient reason to believe that

Congress intended to foreclose consumer participation in the

regulatory process.” Id. Importantly, the Court contrasted this

with the role of handlers and producers:

The [AMAA] contemplates a cooperative venture

among the Secretary, handlers, and producers the

principal purposes of which are to raise the price of

agricultural products and to establish an orderly system

for marketing them. Handlers and producers — but not

consumers — are entitled to participate in the adoption

and retention of market orders. The [AMAA] provides

for agreements among the Secretary, producers, and

handlers, for hearings among them, and for votes by

producers and handlers.

Id. at 346-47. In short, “[t]he structure of th[e] [AMAA]

indicates that Congress intended only producers and handlers,

and not consumers, to ensure that the statutory objectives would

be realized.” Id. at 347. Because the AMAA contemplates this

active role for producers during the rulemaking process, they

occupy a different status under the AMAA from that of

consumers.

13

The Supreme Court’s analysis of the purpose of the AMAA

is also instructive. It observed that “preclusion of consumer

suits will not threaten realization of the fundamental objectives

of the statute” because “[h]andlers, like consumers, are

interested in obtaining reliable supplies of milk at the cheapest

possible prices.” Id. at 352. It contrasted this alignment of

consumer and handlers interests with the interests of producers,

which would not be represented by handlers. Id. Because

producer interests would otherwise go unvindicated, the Court

noted, courts have found suits by producers “necessary to ensure

achievement of the [AMAA]’s most fundamental objectives —

to wit, the protection of the producers of milk and milk

products.” Id. See also Cmty. Nutrition Inst. v. Block, 698 F.2d

1239, 1257 (D.C. Cir. 1983) (Scalia, J., dissenting) (“The direct

beneficiaries of milk marketing orders under the [AMAA] are

milk producers. Even before adoption of the APA, the courts

found a congressional intent to permit them to sue. But where,

as in the present case, [consumers’] grievance is entirely

derivative of [that of handlers,] then the statutory review

provision does suggest that the more remote group was not

meant to have standing to sue.”). “The right of judicial review

is ordinarily inferred where congressional intent to protect the

interests of the class of which the plaintiff is a member can be

found; in such cases, unless members of the protected class may

have judicial review the statutory objectives might not be

realized.” Barlow v. Collins, 397 U.S. 159, 167 (1970). Unlike

the consumers whose interests were coextensive with those of

handlers in Block, 467 U.S. at 532, the producers are the only

party with an interest in ensuring that the price paid them is not

reduced by too large a make allowance paid to handlers.

Admittedly, some discussion in Block seems to sweep

broadly enough to exclude producer challenges to milk

marketing orders. The Supreme Court stated, for example,

“[W]e think it clear that Congress intended that judicial review

14

of market[ing] orders issued under the [AMAA] ordinarily be

confined to suits brought by handlers in accordance with 7

U.S.C. § 608c(15).” Id. at 348 (emphasis added). In context,

the Court’s primary concern seems to have been that allowing

consumer suits would permit a handler to bring suit — either in

its own capacity as a consumer or through other consumers with

whom its interests were aligned — without first exhausting the

administrative remedy required by § 608c(15). See id. Because

producer and handler interests are normally adverse, however,

there is no such objection to producer suits because handlers

“ordinarily” could not induce producers to sue on their behalf.4

Furthermore, reading Block broadly to bar producer suits

like the instant one would leave no room for the Supreme

Court’s holding in Stark , 321 U.S. at 302, 311, that the district

court had jurisdiction over producers’ challenge to a milk

marketing order claimed to exceed the Secretary’s powers.

Like the Interim Rule, the milk marketing order challenged in

Stark computed the blend price owed to producers by first

computing the use value of milk purchased by handlers (based

on the minimum price and quantity for the classes of milk used),

and then computing blend price as a weighted average of that

use value. Id. at 300. The order directed that certain

“adjustments” be deducted from the use value before computing

the blend price. Id. at 301. All of these adjustments were

eventually paid to producers, except for a “cooperative

adjustment,” which was a set amount per hundredweight of milk

paid to producer cooperatives. Id. Because this adjustment was

4

In fact, this court has anticipated and resolved any such risk.

Where a single entity acts as a vertically-integrated “producer-

handler,” it must exhaust before bringing suit in its capacity as a

handler, but not when bringing suit in its capacity as a producer. See

Hettinga, 560 F.3d at 504; Edaleen Dairy, LLC, v. Johanns, 467 F.3d

778, 783 (D.C. Cir. 2007).

15

deducted from the total use value before the blend price was

computed, the adjustment “reduce[d] pro tanto the amount

actually received by the producers for their milk.” Id. at 302.

Producers who were not members of cooperatives challenged

the order on the grounds that the AMAA did not authorize the

Secretary to deduct a sum from the minimum price to be paid

only to cooperatives. Id. at 301. Although no statute provided

an explicit cause of action and the APA had not yet been

enacted, the Supreme Court held that “[t]he authority for a

judicial examination of the validity of the Secretary’s action is

found in the existence of courts and the intent of Congress as

deduced from the statutes and precedents.” Id. at 307-08. In

particular, the Court concluded that the producers had a “definite

and personal claim” because the AMAA assured them

“minimum prices” for milk, in this instance the prices set by the

use value computations without subtractions for cooperatives.

Id. at 305. In other words, in a milk marketing order scheme

like the one underlying the rule challenged in the instant case,

producers had standing to obtain judicial review of an order that

reduced the amount they would receive for their milk.

This court reaffirmed the standing of producers to challenge

certain milk marketing orders in Blair v. Freeman, 370 F.2d 229

(D.C. Cir. 1966). In Blair, a group of Pennsylvania producers

who sold milk into the New York-New Jersey Milk Marketing

Area challenged an order that provided a price increase for

producers located close to New York City, but not for those

located farther away. Id. at 234. This selective price increase

was paid out of the producer settlement fund, and had the effect

of reducing the pool of money to be divided as the blend price

paid to all producers. Id. at 234 n.15; see also Milk in New York

Metropolitan Marketing Area and in Northern New Jersey:

Decision with Respect to Proposed Amendments to Tentative

Marketing Agreement and to Order, 22 Fed. Reg. 4194, 4212-14

(June 14, 1957). Because this practice, like that challenged in

16

Stark, reduced “pro tanto the amount actually received” by the

producers who brought the suit, this court held the producers

had “standing to invoke the protection of equity to insure that

their statutory right to minimum price protection is not being

improperly diminished” by an order which “exceeded the

statutory power of the Secretary.” Blair, 370 F.2d at 234 & n.15

(citing Stark, 321 U.S. at 290).

The parallels to the instant case are apparent. As in Stark

and Blair, the producers challenge a rule deducting funds from

the value of milk before calculating the blend price guaranteed

to producers, thus reducing, “dollar for dollar,” the minimum

price producers are guaranteed for their milk products. Also like

the producers in Stark and Blair, the producers allege not that

the Secretary has misjudged what prices are appropriate, but

rather that the Secretary’s Interim Rule deducts funds, and thus

reduces the blend price, in a way the Secretary is not authorized

to do, namely by reducing the blend price without considering

factors as he was statutorily obliged to address. As the Supreme

Court stated in Stark, “It is because every dollar of deduction

comes from the producer that he may challenge the use of the

fund. The [producers’] complaint is not that their blended price

is too low, but that the blended price has been reduced by a

misapplication of money deducted from the producers’

minimum price,” i.e., from the price computed based on the use

value of the milk sold. 321 U.S. at 308-09.

The Department, and some intervenor handlers, suggest that

Stark and Blair are distinguishable because the money in the

instant case is diverted from the producers at a different point in

the payment stream than occurred in Stark and Blair. In those

cases, the money was diverted from the producer settlement

fund after the value of milk was calculated and after the handlers

had paid for it, but before the blend price was calculated. Here,

the funds are also deducted before the blend price is calculated,

17

but, by contrast, under the Interim Rule the deduction occurs in

the process of calculating the price owed by handlers, before the

handlers pay the producers or the producer settlement fund. The

importance of this difference, which the district court also

emphasized, eludes us. As in Stark and Blair, the producers

claim that the “minimum prices” they are owed, i.e., the value

of the milk, is being reduced unlawfully under the Interim Rule.

It is this interest which the Supreme Court in Stark held

sufficiently “definite and personal” to permit the producers to

challenge its diminution. 321 U.S. at 305. Although the

producers in Stark and Blair complained of diminution of the

blend price through deductions from the producer settlement

fund, there is no indication that either opinion hinged on that

fact. Certainly there is no indication that a diminution at a

different point in the payment-calculation chain would be an

alleged wrong that the APA could not address because the

AMAA had impliedly precluded such a suit.

It is also unavailing for the intervenor handlers and our

dissenting colleague to suggest that because the AMAA requires

approval by the majority of producers before the Secretary’s

orders go into effect, the AMAA must be read impliedly to

preclude all other avenues of redress, including suits alleging an

order is not in accordance with law.

[W]here as here the issue is statutory power to make

the deduction required by the Order, . . . a mere hearing

or opportunity to vote cannot protect minority

producers against unlawful exactions which might be

voted upon them by majorities. It can hardly be said

that opportunity to be heard on matters within the

Secretary’s discretion would foreclose an attack on the

inclusion in the Order of provisions entirely outside of

the Secretary’s delegated powers.

18

Stark, 321 U.S. at 307.5

All but one of the circuit courts of appeal to have considered

the issue have also concluded that producers can challenge milk

marketing orders under the APA, even where the challenge is not

premised on a deduction from the producer settlement fund. The

Sixth Circuit reasoned that “[T]he purpose of the statutory

scheme — raising the price that milk producers receive for their

milk — would be undermined if producers could not challenge

regulations of this type in federal court . . . .” Farmers Union

Milk Mktg. Coop. v. Yeutter, 930 F.2d 466, 467 (6th Cir. 1991).

Similarly, the Seventh Circuit held that producers, as “the very

group the milk marketing law seeks to protect,” “can seek

5

The dissent would read the AMAA to preclude all producer

suits that do not explicitly allege that an order unfairly advantages

some producers at the expense of others, on the theory that producers’

right to vote on orders adequately protects them in other situations.

The effect of this regime would be that when two-thirds of producers

approve an order that is contrary to law but treats all producers alike,

the remaining third of producers must submit to that order without

judicial redress. There is no evidence Congress intended such a

regime, and no court has advanced such a theory before. Instead, the

quotation from Stark, especially the conclusion in the final sentence,

evidences a focus on ensuring a judicial forum for producers who

allege they are harmed by an illegal order, regardless of their right to

vote on that order. See Alto Dairy v. Veneman, 336 F.3d 560, 565 (7th

Cir. 2003) (describing Stark as holding producers “could challenge .

. . an order if in issuing it the Agriculture Department had exceeded

the authority delegated to it by Congress and in doing so had infringed

a definite right of the producer”). Similarly, in Block the Supreme

Court states that judicial review of producer suits is necessary to

ensure the AMAA’s “fundamental objectives” of “the protection of

producers,” 467 U.S. at 351, without limiting this to the protection of

some producers from an abusive majority of other producers. This

limitation is read into Block by the dissent. Dis. Op. at 4.

19

judicial review of milk marketing orders that pinch them,” Alto

Dairy v. Veneman, 336 F.3d 560, 566, 569 (7th Cir. 2003). See

Dairylea Coop., Inc. v. Butz, 504 F.2d 80, 83 (2d Cir. 1974);

Suntex Dairy v. Bergland, 591 F.2d 1063, 1067 (5th Cir. 1979);

Minn. Milk Producers Assoc. v. Madigan, 956 F.2d 816, 818 (8th

Cir. 1992).6 Only the Ninth Circuit has read Block as broadly as

the Department urges, stating in Pescosolido v. Block, 765 F.2d

827, 831 (9th Cir. 1985), that “We believe that [Block] can be

interpreted generally to foreclose judicial review sought by

anyone other than handlers . . . .” In two recent cases addressing

handler exhaustion of administrative remedies, this court has

arguably assumed, without directly addressing the issue, that

producers can bring suits challenging the Secretary’s orders. See

Hettinga, 560 F.3d at 503-504; Edaleen Dairy, 467 F.3d at 783;

supra note 4.

It is true, as the Department and intervenor handlers point

out, that a decade before Blair, in Benson v. Schofield, 236 F.2d

6

As with Stark and Block, the dissent limits the holdings of

other circuits to fit a new line in the sand. In Alto Diary, for example,

a group of producers made the choice not to participate in a

rulemaking and later complained that the promulgated rule differed so

greatly from the proposal that they did not receive adequate notice.

336 F.3d at 570. They alleged no systemic failure in the referendum

process nor oppression by a producer majority, only a procedural

shortcoming. In those cases that did involve disputes among

producers, nothing in the courts’ opinions indicates that the

determination of whether producers had a cause of action hinged on

that fact. See, e.g., Minn. Milk Producers, 956 F.2d at 817 (finding

standing for producers alleging violation of the Secretary’s obligation

under AMAA); Farmers Union, 930 F.2d at 473 (“The purpose of the

AMAA strongly favors judicial review of aspects of market orders that

concern producers in lawsuits brought by producers.”); Dairylea

Coop., 504 F.2d at 83 (“The Supreme Court . . . has held that this

silence [as to judicial remedies] does not bar producers . . . .”).

20

719 (D.C. Cir. 1956), this court affirmed the dismissal of a

complaint by dairy producer-handlers challenging a milk

marketing order that extended the limits of a milk marketing

area. In that case, the court addressed the merits of the claims

that the rulemaking was procedurally defective for lack of notice

to producers and an opportunity for them to attend hearings, id.

at 722-23, but further concluded they were not seeking to

vindicate “a statutory privilege protected by judicial remedies,”

and thus “lack[ed] a legal right.” Id. at 723 (citing Stark, 321

U.S. at 306). Benson is inapposite for a number of reasons.

First, in Benson the court was not addressing a diminution of

producers’ statutorily-guaranteed blend prices, as in Stark, Blair,

and the instant case, but rather an order that increased the

boundaries of a marketing area to cover a greater number of

handlers, an action the court held did not infringe any statutory

right possessed by the producers because only handlers were

affected, id. at 723. Second, the suit in Benson was not brought

under the APA, and the court did not hold that the AMAA

impliedly precluded producer suits, only that the AMAA did not

itself provide a cause of action for the claimed grievance

regarding a marketing area. Given also that Blair, which

presented a situation more analogous to the instant case, was

decided after Benson and acknowledged a cause of action for

producers challenging orders as beyond the Secretary’s power,

Benson is easily distinguishable.

Accordingly, we hold that the producers can bring suit under

the APA to challenge the Interim Rule, which directly affects

their blend prices through increased make allowances, even

though the milk marketing orders will not directly affect the

producer settlement fund. The producers are aggrieved, within

the meaning of the APA, by the alleged diminution of their

personal rights secured under the AMAA, the Interim Rule they

challenge constitutes final agency action, and they seek non-

monetary injunctive relief. 5 U.S.C. §§ 702, 704. We therefore

21

turn to the merits of the producers’ contention that the Secretary

was statutorily required to determine and consider producers’

feed and fuel costs in seeking to change a make allowance and

failed to do so.

III.

In seeking to enjoin the Interim Rule on the ground that the

Secretary failed to carry out mandated responsibilities, the

producers rely on AMAA §§ 608c(18), enacted in 1937, and on

§ 608c(17)(G), the 2008 Act amendment to the AMAA.

Section 608c(18) requires the Secretary, in initially setting

dairy prices, to ensure that those prices reflect a variety of

factors. 7 U.S.C. § 608c(18).7 The parties disagree about which

7

Section 608(c)(18), “Milk prices,” provides in relevant part:

The Secretary of Agriculture, prior to prescribing any term in

any marketing agreement or order, or amendment thereto,

relating to milk or its products, if such term is to fix minimum

prices to be paid to producers . . ., or prior to modifying the

price fixed in any such terms, shall ascertain the parity prices

of such commodities. The prices . . . shall . . . be adjusted to

reflect the price of feeds, the available supplies of feeds, and

other economic conditions, which affect market supply and

demand for milk or its products in the market area to which

the contemplated marketing agreement, or, or amendment

relates. Whenever the Secretary finds, upon the basis of the

evidence adduced at the hearing required by section 608b . .

. that the parity prices of such commodities are not reasonable

in view of the price of feeds, the available supplies of feeds,

and other economic conditions which affect market supply

and demand for milk and its products in the marketing area to

which the contemplated agreement, order, or amendment

relates, he shall fix such pries as he finds will reflect such

22

of § 608c(18)’s requirements apply to rulemakings like this one,

in which the Secretary readjusts rather than initially sets prices.

We need not decide the issue because even if all of § 608c(18)’s

requirements apply, they impose no obligation relevant here

beyond that imposed by § 608c(17)(G).

Section 608c(17)(G) provides:

Monthly feed and fuel costs for make allowances

As part of any hearing to adjust make allowances under

marketing orders commencing prior to September 30,

2012, the Secretary shall–

(i) determine the average monthly prices of feed and

fuel incurred by dairy producers in the relevant

marketing area;

(ii) consider the most recent monthly feed and fuel price

data available; and

(iii) consider those prices in determining whether or not

to adjust make allowances.

factors, insure a sufficient quantity of pure and wholesome

milk, and be in the public interest. Thereafter, as the

Secretary finds necessary on account of changed

circumstances, he shall after due notice and opportunity for a

hearing, make adjustments in such prices.

7 U.S.C. § 608(c)(18) (emphasis added). The “parity price” of

commodities is a statistical measure of prices adjusted for certain

historical and efficiency factors. Id. § 1301(a)(1). In the Interim Rule

the Secretary found that parity prices were not reasonable in view of

the statutory factors. 73 Fed. Reg. at 44,613 [JA 122/2].

23

7 U.S.C. § 608c(17)(G) (emphasis added). The 2008 amendment

to the AMAA thus plainly requires the Secretary, in adjusting

make allowances, to consider producers’ feed and fuel prices, and

thus there is no occasion to decide if § 608c(18) also imposes

such obligations.

The Department maintains the 2008 Act did not apply to the

Interim Rule because the amendment to the AMAA took effect

too late. The 2008 Act went into effect May 22, 2008, see supra

note 1, and directs the Secretary to determine and consider certain

costs “[a]s part of any hearing to adjust make allowances,” 7

U.S.C. § 608(c)(17)(G). The final public hearing on the proposed

order took place almost a year earlier, on July 11, 2007. Because

the 2008 Act was not then in effect, the Department concludes the

Secretary was under no obligation to determine and consider

producers’ costs “as part of” that hearing. This is true only if, as

the Department maintains, the meaning of the word “hearing” in

§ 608c(17)(G) can only refer to “that part of the proceeding

which involves the submission of evidence,” as the Department’s

regulations in effect now and at the time of enactment of the 2008

Act provide. See 7 C.F.R. § 900.2(h). Such a definition,

however, is incompatible with the plain text of § 608c(17)(G),

which requires the Secretary “as part of any hearing” to

“determine” feed and fuel costs and to “consider” those costs

when changing make allowances. If the word “hearing” referred

only to the proceeding in which an Administrative Law Judge

(“ALJ”) receives evidence, then Congress’ directions to the

Secretary would make no sense. The Secretary can only

“determine” costs after the evidence has been received. By then,

according to the Department’s reading of the 2008 Act, it is too

late because the “hearing” has already concluded. Likewise, the

Secretary could not “consider” costs “as part of [the] hearing” as

the Department defines it because those costs would not yet have

been determined. It would be impossible to comply with the

2008 Act because the Secretary would need to do at once steps

24

that logically must follow sequentially. The Department’s

regulations also make clear that the Secretary reaches decisions

on the basis of the completed evidentiary record. See 7 C.F.R. §

900.13a (“After due consideration of the record the Secretary

shall render a decision.”).

In context, the term “hearing” in § 608c(17)(G) must mean

more than the proceeding during which evidence is submitted to

the Secretary. It must also include the portions of the rulemaking

process during which the Secretary analyzes the evidence in the

rulemaking record and reaches conclusions, because only then

can the Secretary “determine” and “consider” costs. Indeed,

another provision of the 2008 Act amendment to the AMAA

seems to contemplate a broader understanding of “hearing,”

including within “Hearing timeframes” events that take place

after the close of an evidentiary hearing, such as the submission

of post-hearing briefs. See 7 U.S.C. § 608c(17)(C). This

interpretation of “hearing” admittedly is at odds with the

Department’s regulation, see 7 C.F.R. § 900.2(h), and courts

“generally presume that Congress is knowledgeable about

existing law pertinent to the legislation it enacts,” Goodyear

Atomic Corp. v. Miller, 486 U.S. 174, 184 (1988); see United

States v. Wilson, 290 F.3d 347, 357 (D.C. Cir. 2002). However,

as the Supreme Court observed in Block in regard to a different

canon of construction, the presumption that Congress was aware

of the background law “is just that — a presumption[, which,]

like all presumptions used in interpreting statutes, may be

overcome by specific language . . . that is a reliable indicator of

congressional intent.” 467 U.S. at 349. Here, the presumption

that Congress was aware of and incorporated the Department’s

definition of “hearing” would lead to the absurd result that

Congress intended to impose a requirement with which the

Secretary could not comply. Courts, “in interpreting the words

of a statute, [have] ‘some scope for adopting a restricted rather

than a literal or usual meaning of its words where acceptance of

25

that meaning would lead to absurd results . . . or would thwart

the obvious purpose of the statute . . . .’” In re Trans Alaska

Pipeline Rate Cases, 436 U.S. 631, 643 (1978) (quoting Comm’r

v. Brown, 380 U.S. 563, 571 (1965)); see Secretary of Labor,

Mine Safety & Health Admin. v. National Cement Co. of Cal.,

Inc., 494 F.3d 1066, 1069 (D.C. Cir. 2007); Engine Mfrs. Ass’n

v. EPA, 88 F.3d 1075, 1088 (D.C. Cir. 1996). For the same

reason, the court owes no deference to the Department’s

interpretation of § 608c(17)(G) in this litigation; even had it been

set forth by the Secretary as part of the rulemaking, it fails at

Chevron step one. Applying “traditional tools of statutory

construction” the court must reject the construction as contrary to

clear congressional intent. Chevron, 467 U.S. at 842-43.

In order to avoid the absurd result of an impossible

instruction to the Secretary, § 608c(17)(G) must be read to allow

the Secretary an opportunity to determine and consider

producers’ feed and fuel costs after the evidentiary record is

closed. The rulemaking record for the Interim Rule does not

indicate when the Secretary’s review and deliberation took place,

but for § 608c(17)(G) to be implemented in a reasoned manner,

a “hearing” would be tied to the conclusion of the rulemaking,

marked here by June 20, 2008 publication of the Tentative

Decision. So understood, because the Secretary had not

concluded the rulemaking for the Interim Rule when the 2008 Act

went into effect on May 22, 2008, the Secretary was obligated to

follow the requirements of § 608c(17)(G).

IV.

The 2008 amendment to the AMAA requires the Secretary

to (i) determine the average monthly feed and fuel costs of dairy

producers “in the relevant marketing area;” (ii) “consider the

most recent monthly feed and fuel price data available” in

arriving at that determination; and (iii) “consider those prices in

26

determining whether or not to adjust make allowances.” 7 U.S.C.

§ 608c(17)(G)(i)-(iii). Here, we part ways with the producers.

Their contention that the Secretary failed to carry out these

obligations is belied by the rulemaking record.

A. The record shows that the Secretary determines monthly

feed and fuel costs (as well producers’ other major costs) as a

matter of course. During the evidentiary hearing, the ALJ took

official notice of Agricultural Prices reports stretching back

several years and up to the date of the hearing. These monthly

and annual reports, prepared by the Department’s National

Agricultural Statistics Service, use extensive sampling to

compute the nationwide average prices paid by and to farmers for

the inputs and outputs of farming. See, e.g., NAT’L AGRIC.

STATISTICS SERV., DEPT. OF AGRIC., AGRIC. PRICES 26 (May

2008).8 Included are the prices paid for feed, fuel, and a variety

of other inputs such as machinery and rent, as well as a ratio of

the cost of feed to milk. Id. 28. These categories are broken

down into subcategories and compared to previous months, years,

and baseline and parity costs. Id. 28-29. Given these extensive

computations by the Department in the rulemaking record, there

can be no doubt the Secretary determined producers’ feed and

fuel costs, even though the proposed rule did not explicitly

purport to do so in fulfillment of the requirements of

§ 608c(17)(G)(i), or indeed mention that provision at all. See

also Interim Rule, 73 Fed. Reg. 35,307 (citing AGRIC. MKTG.

SERV., U.S. DEP’T OF AGRIC., ECONOMIC ANALYSIS: CLASS III

AND IV PRICING FORMULAS (2008)).

The Secretary complied as well with his obligation to

determine those costs in “the relevant marketing area,”

§ 608c(17)(G)(i). That provision is ambiguous because it does

8

Available at http://usda.mannlib.cornell.edu/MannUsda/

viewDocumentInfo.do?documentID=1002.

27

not define “relevant.” The Department determines the

nationwide average for producers’ monthly feed and fuel costs in

the Agricultural Prices reports. The producers contend that

cannot satisfy the Secretary’s obligations to determine costs “in

the relevant marketing area,” and the Secretary must instead

compute separate costs for each national marketing area as those

areas are defined in Department regulations. See, e.g., 7 C.F.R.

§ 1001.1 (2008) (defining “Northeast Marketing Area” to include

certain states and counties of other states). However, as the

Department points out, the Secretary determined years ago that

Class III and IV “dairy products can and do compete on a

national market basis,” and the value of milk used for Class III

and IV products is thus driven by this national market. Milk in

the New England and Other Marketing Areas: Amplified

Decision, 59 Fed. Reg. 42,422, 42,424 (Aug. 17, 1994). In the

Tentative Decision, the Secretary reiterated that because those

products “compete in a national marketplace,” the data

considered in setting make allowances must likewise be

nationwide in scope. 73 Fed. Reg. 35,325. In using the term

“relevant marketing area,” Congress did not indicate an intention

to forbid that long-standing practice, but instead to invoke the

Secretary’s expertise. Given the broad statutory phrase, it was

reasonable for the Secretary to determine producer costs on a

nationwide basis, where he has determined the nationwide market

is the relevant area.

The text of § 608c(18) differs very slightly in structure on

this point from that of § 608c(17)(G). It provides the Secretary

must fix prices to reflect costs and conditions “in the market area

to which the . . . [milk marketing order or amendment] . . relates.”

See supra note 7. Assuming that obligation extends to this

rulemaking, the Secretary has complied for the same reasons he

has complied with § 608(17)(G)(i).

28

B. The Secretary also met his obligation to consider “the

most recent” price data available when determining the

producers’ costs. 7 U.S.C. § 608c(17)(G)(ii). The ALJ took

official notice of the monthly Agricultural Prices reports either

through the end of 2007 or up through the date of the post-

hearing briefing – in either event up to or past the close of the

evidentiary record. The producers contend this data was too old

to qualify as “the most recent monthly . . . data available,” id.,

because the evidentiary hearing concluded about one year before

the Tentative Decision was published. However,

§ 608c(17)(G)(ii) does not define “most recent monthly feed and

fuel price data available.” The court would normally defer to a

reasonable definition by the Secretary, see Chevron, 467 U.S. at

843, but the Secretary did not advance an interpretation in the

rulemaking, nor address the issue in his brief to this court. The

court may readily conclude, upon reading § 608c(17)(G) as a

whole, see supra at [24-25], that the most reasonable

interpretation is that when “determining” feed and fuel costs, the

Secretary must use the most recent data available as of the close

of the evidentiary record. So read, the Secretary complied by

using up-to-date data in compiling the figures in Agricultural

Prices, see, e.g., AGRIC. PRICES 26 (May 2008), and in taking

official notice of the most recent issue of that report as of the

close of the evidentiary period.

The producers offer a different reading of the statute which

would require the Secretary to consider “the most recent . . . data

available” as of the time the proposed rule is published (here, the

Tentative Decision of June 20, 2008). But § 608c(17)(G)(ii)

requires consideration of the most recent data “available,” not the

most recent data conceivable, and at some point the Secretary

must stop receiving new evidence and review the rulemaking

record. Time is also required to draft and publish the proposed

rule. This is true even though the producers point out that the

Secretary accepted a report from the state of California in

29

November 2007, after the record had closed. See Tentative

Decision, 73 Fed. Reg. at 35,324 n.1. That the Secretary chose

to reopen the record to accept new evidence on a single point

does not indicate that he would be obliged to do so by

§ 608c(17)(G)(ii) in order to have the most recent data

“available.” Nothing in the 2008 Act indicates Congress intended

to impose an unworkable obligation on the Secretary to reopen

the record repeatedly to receive new data during the process of

“determin[ing]” and “consider[ing].” As there must be a cutoff,

the court has no basis on this record to fault a cutoff date of the

close of the evidentiary record, one year before the Interim Rule

was issued. Although it is conceivable that delay in publishing

a proposed rule until long after the record closed could be

inconsistent with the requirement to consider the “most recent

data available,” the producers show no prejudice as a result of the

Secretary’s failure to consider cost data available on June 20,

2008. See City of Portland v. EPA, 507 F.3d 706, 717 (D.C. Cir.

2007); 5 U.S.C. § 706.

C. With regard to the Secretary’s obligation to “consider

[producers’ feed and fuel] prices in determining whether or not

to adjust make allowances,” 7 U.S.C. § 608c(17)(G)(iii), the

Secretary explicitly addressed these costs in promulgating the

Interim Rule:

In the aggregate, the costs of producing milk are

reflected in the supply and demand conditions for the

dairy products. When the supply of milk is insufficient

to meet the demand for Class III and Class IV products,

the prices for these products increase as do regulated

minimum milk prices paid to dairy farmers because the

milk is more valuable and this greater milk value is

captured in the pricing formulas. Dairy farmers face no

regulatory minimums in their costs and face no

30

regulated minimum payment obligation in the way that

regulated handlers must pay dairy farmers for milk.

73 Fed. Reg. at 35,324. The Secretary contrasted these producers

costs, reflected in market pricing, with handlers’ costs of

manufacturing:

The ability of a manufacturer to offset cost increases are

limited by the level of make allowances in the Class III

and Class IV price formulas. Manufacturing processors

are charged the [Federal Milk Marketing Order]

minimum price for producer milk used to produce Class

III and Class IV products. However, plant

manufacturing cost increases may not be recovered

because Class III and Class IV product-price formulas

use make allowances that are fixed regardless of market

conditions and change only by regulatory action.

Simply put, when manufacturing cost increases result in

costs higher than those provided by the formula make

allowance factors, the value of milk used to make those

products may be over-valued.

Id. at 35,323. The Secretary concluded that it was therefore

necessary to increase make allowances to reflect increases in the

manufacturing costs incurred by handlers as shown in the record

evidence. Id. at 35,323-4.

In sum, the Secretary considered the costs to producers, but

reasoned that those costs could be recouped through market

mechanisms. The make allowances, by contrast, represent the

costs of handlers and are the only mechanism through which

manufacturers’ costs can be recouped under the pricing formulas.

The Secretary concluded it was necessary to increase make

allowances to reflect handlers’ increased costs. Although the

Secretary increased make allowances and thereby decreased the

31

amount received by producers for a given market price, his well-

reasoned analysis in the rulemaking record constitutes

“consider[ing producers’ feed and fuel] prices in determining

whether or not to adjust make allowances,” § 608c(17)(G)(iii).

V.

Although we hold that the producers may challenge the

Secretary’s decision in the Interim Rule to increase make

allowances under the APA, and they correctly contend the

Secretary was required to consider their costs for feed and fuel in

deciding whether or not to amend make allowances, for the

reasons set forth in Part IV they have shown no likelihood of

success on the merits of their contention the Secretary exceeded

his powers by failing to consider those costs. Thus, this court

need not proceed to review the other three preliminary injunction

factors and the district court’s balancing of factors. See Apotex,

Inc. v. FDA, 449 F.3d 1249, 1253-54 (D.C. Cir. 2006). The

denial of the preliminary injunction is therefore affirmed.

On interlocutory review of petitions for injunctive relief, this

court may reach the merits of a claim “inextricably bound up”

with the issues on appeal. Hartman v. Duffey, 19 F.3d 1459,

1464 (D.C. Cir. 1994) (quoting 16 CHARLES A. WRIGHT ET AL.,

FEDERAL PRACTICE AND PROCEDURE § 3921 p.17 (1977)). As

the Supreme Court has observed, “Review of a preliminary

injunction ‘is not confined to the act of granting [or denying] the

injunctio[n], but extends as well to determining whether there is

any insuperable objection, in point of jurisdiction or merits, to the

maintenance of [the] bill, and if so, to direct a final decree

dismissing it.’” Munaf v. Geren, 128 S. Ct. 2207, 2219 (2008)

(quoting City and County of Denver v. N.Y. Trust Co., 229 U.S.

123, 136 (1913)) (all but first alternations in original); see also

Deckert v. Independence Shares Corp., 311 U.S. 282, 287 (1940).

Because there is an “insuperable objection” to the producers’

32

claims predicated on the Secretary’s alleged failure to consider

feed and fuel costs under the AMAA, 7 U.S.C. §§ 608c(17)(G)

and 608c(18), those claims in their complaint must be dismissed

for failure to state a claim. Munaf, 128 S. Ct. at 2220. We

remand the case to the district court for further proceedings

consistent with this opinion.

GRIFFITH, Circuit Judge, dissenting in part and

concurring in the judgment in part: I write separately because

I believe the Agricultural Marketing Agreement Act of 1937,

Pub. L. No. 75-137, 50 Stat. 246, precludes judicial review of

the producers’ claims.

The Administrative Procedure Act grants a cause of

action to “[a] person suffering legal wrong because of agency

action, or adversely affected or aggrieved by agency action

within the meaning of a relevant statute.” 5 U.S.C. § 702

(2006). It withdraws that cause of action “to the extent that

. . . statutes preclude judicial review.” Id. § 701(a)(1).

Preclusion may be found in the express language of a statute

or in “the structure of the statutory scheme, its objectives, its

legislative history, and the nature of the administrative action

involved.” Block v. Cmty. Nutrition Inst., 467 U.S. 340, 345

(1984). “[W]hen a statute provides a detailed mechanism for

judicial consideration of particular issues at the behest of

particular persons, judicial review of those issues at the behest

of other persons may be found to be impliedly precluded.” Id.

at 349.

The Act expressly provides only to handlers, and no one

else, a right to petition the Secretary of Agriculture for review

of a marketing order and to obtain judicial review of the

Secretary’s ruling in response. 7 U.S.C. § 608c(15) (2006).

The majority concludes nevertheless that producers have a

right to judicial review because, unlike the consumers in

Block, they play an “active role . . . during the rulemaking

process,” Maj. Op. at 12. But that does not mean Congress

intended producers to be afforded judicial review for any

complaint they might have with a marketing order.1 To the

1

The majority purports to limit its grant of judicial review to cases

where producers claim a violation of their definite and personal

rights. See Maj. Op. at 15, 20. But the fact that producers have a

“definite and personal” right at stake in the contested order, as they

2

contrary, their important role at the agency level explains why

Congress withheld judicial review from them. No marketing

order or amendment may issue without the approval of two-

thirds of the affected producers (measured either by number

or by volume of milk produced). See 7 U.S.C. § 608c(8)–(9).

Producers can veto a proposed order for any reason; a court

can only overturn an order if the Secretary has acted

arbitrarily, capriciously, or contrary to law, see 5 U.S.C.

§ 706. The producer referendum is a far more powerful tool to

challenge an action by the Secretary than the deferential

review of a judicial forum. Ordinarily, producer interests will

not, as the majority fears, “go unvindicated” without the

availability of judicial review, Maj. Op. at 13. By contrast,

Congress gave handlers a judicial remedy because they may

vote on, but cannot block, a marketing order. An order or

amendment may issue if fifty percent of the affected handlers

vote to approve it. But if the handler referendum fails, the

Secretary can nonetheless issue the order if he determines that

the handlers’ disapproval prevents the effectuation of the

Act’s policy and that the order is necessary to implement that

no doubt have in this case, tells us only that they have statutory (as

well as constitutional) standing. It does not tell us whether

Congress has precluded them from enforcing this definite and

personal right in court. See Stark v. Wickard, 321 U.S. 288, 306

(1944) (“[E]ven where a complainant possesses a claim to

executive action beneficial to him . . . it does not necessarily follow

that actions of administrative officials, deemed by the owner of the

right to place unlawful restrictions upon his claim, are cognizable

in appropriate federal courts of first instance.”); Block, 467 U.S. at

351 (explaining that the Stark producers’ “definite and personal

rights” gave them “standing to object to the administration of the

settlement fund,” but that this “standing could not by itself ensure

judicial review of the Secretary’s action at their behest”); id. at 353

n.4 (finding no need to address the constitutional and statutory

“standing issues” because judicial review was precluded).

3

policy. See 7 U.S.C. § 608c(8)–(9). No similar override is

available if the producers vote down the proposed order.

In some cases, however, the producer referendum is not

an adequate forum in which to challenge unlawful actions of

the Secretary. As the Court noted in Stark v. Wickard, 321

U.S. 288 (1944), the producers’ veto power “cannot protect

minority producers against unlawful exactions which might

be voted upon them by majorities.” Id. at 307. If the

Secretary’s proposed action would benefit some producers at

the expense of others, there is a risk that the majority

producers will exploit the referendum process to approve

measures in marketing orders that discriminate against

minority producers. In these instances, judicial review is

available for the minority producers. For example, the

minority producers in Stark challenged a provision that

required the market administrator to deduct a certain amount

from the money paid by milk handlers before distributing it to

producers. The deducted amount would then be paid only to

producers who were members of cooperatives. See id. at 300–

01. By sanctioning higher payments to producer cooperatives

and lower payments to independent producers, this provision

threatened the statutory objective of producer equality.

Because the producer cooperatives had sufficient voting

power to control the outcome of the referendum regardless of

the lawfulness of the provision, there was no adequate forum

in which the minority producers could challenge the provision

as unlawful. And without judicial review for their claim, no

group could be “relied upon to challenge agency disregard of

the law,” Block, 467 U.S. at 351.

The majority reads Stark to require judicial review of all

claims by producers. But Block emphasized that the structure

of the Act demonstrates Congress’s intent “that judicial

review of market orders issued under the Act ordinarily be

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confined to suits brought by handlers,” 467 U.S. at 348. The

Court viewed the result in Stark as a limited exception

applicable in “certain” cases, id. at 351, when judicial review

is “necessary to ensure achievement of the Act’s most

fundamental objectives,” id. at 351–52. When divergent

producer interests threaten the ability of minority producers to

use the forum provided by the Act—the referendum—judicial

review is permitted to safeguard the primary statutory

objective: “to ensure that the benefits and burdens of the milk

market are fairly and proportionately shared by all dairy

farmers,” id. at 342; see also 7 U.S.C. § 602 (declaration of

statutory policy). Judicial review of orders and amendments

that discriminate between producers ensures that the

destabilizing producer competition targeted by the Act, see

Block, 467 U.S. at 343, does not infect the milk marketing

orders themselves.

Permitting judicial review of producers’ claims in this

narrow set of circumstances is consistent with our precedent

and that of other circuits. The cases cited by the majority in

support of a more general grant of judicial review for

producers each involved divergent producer interests

comparable to the circumstances in Stark. See Alto Dairy v.

Veneman, 336 F.3d 560 (7th Cir. 2003) (Wisconsin producers

who sold milk in Mideast region challenged amendment of

Mideast pooling provision adopted without notice to them);

Minn. Milk Producers Ass’n v. Madigan, 956 F.2d 816 (8th

Cir. 1992) (producers outside marketing area, who could not

vote on the challenged order, argued that it stimulated

overproduction in other areas); Farmers Union Milk Mktg.

Coop. v. Yeutter, 930 F.2d 466 (6th Cir. 1991) (rural

producers challenged location adjustments that favored

producers closest to cities); Suntex Dairy v. Bergland, 591

F.2d 1063 (5th Cir. 1979) (independent milk producers

challenged bloc voting by large producer cooperative);

5

Dairylea Coop., Inc. v. Butz, 504 F.2d 80 (2d Cir. 1974)

(recent market entrant challenged provision resulting in lower

prices for newly entering producers); Blair v. Freeman, 370

F.2d 229 (D.C. Cir. 1966) (distant producers challenged

“nearby differential” in price that advantaged producers

closest to New York City); cf. Pescosolido v. Block, 765 F.2d

827 (9th Cir. 1985) (prohibiting judicial review of orange

growers’ claim that Secretary was not ensuring parity prices,

an interest common to all growers).

The difference between this case and those—the one that

“eludes” the majority, Maj. Op. at 17—is that the producers

here had an adequate forum in which to challenge the

Secretary’s actions because the new make allowances treat all

producers uniformly. Because the producers’ interests here

are all aligned in the same direction, the risk that existed in

Stark of larger producers capturing the referendum process to

unlawfully disadvantage the minority is not present. The

producer referendum thus served its purpose as a check on the

Secretary’s statutory authority. Judicial review is not

necessary to vindicate the objectives of the Act, and we

should defer to the congressional preference—expressed in

the Act’s structure—to preclude that review. I would affirm

the district court’s ruling that judicial review is precluded and

remand with direction to dismiss the producers’ claims.