Petition for Writ of Certiorari — Riverbend Farms, Inc. v. Madigan

Supreme Court brief1992

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ores of pe ce

IN THE

Siygireme Court of the United States

OCTOBER TERM, 1992

RIVERBEND FARMS, INC., a California Corporation; SUNNY

COVE CITRUS ASSOCIATION, a California Cooperative

Corporation; BELRIDGE PACKING Co., a California Cor-

poration; SEQUOIA ORANGE COMPANY, INC., a California

Corporation; and EXETER ORANGE COMPANY, INC., a

California Corporation,

Petitioner,

EDWARD R. MADIGAN,

Secretary, Department of Agriculture,

Respondents,

Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

PETITION FOR A WRIT OF CERTIORARI

JAMES A. Moopy

Suite 600

2300 N. Street, N.W.

Washington, D.C. 20037

September 8, 1992 (202) 663-9011

WILSON - Epes PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

In response to alleged disorderly marketing conditions,

USDA imposed discretionary quotas on the shipment of

navel oranges grown in California and Arizona pursuant

to marketing order 907 issued under the Agricultural

Marketing Agreement of 1937. USDA claimed the “good

cause” exception of informal notice-and-comment rule-

making under the APA. The Ninth Circuit agreed with

the District Court that USDA’s claimed “emergencies”

were unjustified. But the Ninth Circuit invoked the

“prejudicial error” doctrine to preserve the enforceability

of the quotas, departing from decisions of every other ap-

pellate court and this Court holding that an agency’s

failure to abide by a required procedural safeguard ren-

dered the resulting rule void and unenforceable. The

questions presented are:

1. Whether regulations found by the Court to have

been issued in violations of the APA’s procedural safe-

guards can nevertheless have the “force of law’ by virtue

of the “prejudicial error” doctrine?

2. Assuming, arguendo, that the procedural error was

harmless, did the reviewing courts abdicate their judi-

cial function by failing to examine the substance of the

quota rules to determine if they were arbitrary, capri-

cious, or an abuse of discretion, thereby requiring re-

mand for the lower courts to perform this essential task?

(i)

TABLE OF CONTENTS

tie 8 Ey 3 8” 1s | ea

TABLE OF CONTENTS ............ f char A EELS PP

pe gt i yy st. ae ae

I ci casnendaneninns

STATUTES AND REGULATIONS 000. eee

STATEMENT OF THE CASE..................... saidesdnniihianionale

—, SERRISEEFCE GE SES Spi Se a OS ae ea

Review should be granted because the Ninth

Circuit has decided an important question of

federal law contrary to all prior decisions of this

by Rial SERIE Aa ae

Review should be granted to prevent the “preju-

dicial error” doctrine from becoming the excep-

tion that swallows the “rule” of procedural safe-

ELE 0 REE

a. The decision will encourage agencies to evade

procedural safeguards and avoid judicial re-

(att Re

b. By abandoning a bright line test, the decision

will embroil the courts in ad hoc case-by-case

review of agency procedures and challengers

actions in order to determine if there is

enough prejudice to warrant invalidation of

ee ieaiaieneks

The decision ignores Congressional intent that

procedural safeguards be strictly enforced by

courts and the original narrow construction

given to the “prejudicial error” rule...

(ili)

TABLE OF CONTENTS—Continued

Page

4. Review should be granted to resolve the split in

the circuits created by this decision. ..................... 21

5. The decision should be summarily reversed in

order to permit the lower courts to perform the

required task upon judicial review of agency ac-

tion to determine substantively whether it was

arbitrary, capricious, or an abuse of discretion... 24

6. Review should be granted because the decision

will impact dozens of other cases. . ee 28

APPENDIX:

Ninth Circuit Opinion Affirming in Part, Reversing

in Part, and Remanding, March 17, 1992 la

Ninth Circuit Order Denying Rehearing, June 9,

ROU © ceiecccicteibaicentessccuiciasiata ematstoun, Buea etme cece 17a

District Court Opinion Denying USDA Motion for

Reconsideration, March 22, 1990 _....... 19a

District Court Opinion Granting Plaintiffs’ Motion

for Summary Judgment, May 31, 1989 22a

I oan een panes eee eweccs ae

pee Rete TRL eee . 60a

USDA August 25, 1992 press release _... mens a

TABLE OF AUTHORITIES

Cases:

Action on Smoking and Health v. CAB, 713 F.2d

795 (D.C. Cir. 1983), subsequent appeal, 724

Fae Shh Ce Toe BE oe

American Horse Protection Assn. v. Lyng, 812 F.2d

1 (D.C. Cir. 1987), review after remand, 681

FP. Supp. 969 (D.D.C. 1968)...

American Textile Mfgrs. Inst. v. Donovan, 452 U.S.

cot Cb 8 ReaD sie a RE AE AROSE OO Rn REO

Anderson v. Butz, 550 F.2d 459 (9th Cir. 1977) ....

Arlington Oil Mills v. Knebel, 543 F.2d 1092 (5th

= Rieti Peet ne bi a

Bowen v. Georgetown Univ ersity Hospital, 488 U.S.

SO ET a ee eee ee

Bowman Transportation, Inc. v. Arkansas-Best

Freight Systems, 419 U.S. 281 (1974)...

Burlington Truck Lines v. United States, 371 U.S.

Me 2. j SORestlecR nial RRC pur es erm A) ey Ra ABln aie Oy

5 Desa ae RIN SEPTATE Ce PMP M ARN ERS EIS HD AL aN

Chocolate Mfgrs. Assn. of U.S. v. Block, 755 F.2d

Se, TP es es ROE kek

Chrysler Corp. v. Brown, 441 U.S. 281 (1979) ......

Citizens to Preserve Overton Park v. Volpe, 401

SPs SEE SPREE settee cue ee eee

City of Brookings Mut. Tel. Co. v. FCC, 822 F.2d

Sa WI BED rece

County of Del Norte v. U.S., 732 F.2d 1462 (9th

Cir. 1984) ....... saeuguabipetbnbsiiinacianaoiomseniaae abate ena

Georgetown University Hospital v. Bowen, 821

F.2d 750 (D.C. Cir. 1987), affirmed, 488 U.S.

moe, 166 &. CA. OS 11988)... .........

Independent US Tanker Owners Committee v. Dole,

809 F.2d 847 (D.C. Cir. 1987), cert. den., 108

ee ee ee ee ee

Levesque v. Block, 723 F.2d 175 (1st Cir. 1983)..

Lionz v. Heckler, 800 F.2d 871 (9th Cir. 1986).

Mada-Luna v. Fitzpatrick, 813 F.2d 1006 (9th

Re IEE selec eee aa ea POI a SNIDER RS

Page

TABLE OF AUTHORITIES—Continued

Page

Market Street Ry. v. Cal. Railroad Commission, 324

pf Be, |) RRR eeai eet eal eons saree 21

McKesson v. Div. of Alcoholic Beverages and To-

bacco, Dept. of Bus. Regulation of Florida, 496

ry ae NR es eet seek cieeaie aa ieeskioaes 28

McLouth Steel Products Corp. v. Thomas, 838 F.2d

SET ie Fs Ri iaiaiideeettaksinstenanicetcmntsoccsacaas 15, 21

Morton v. Ruiz, 415 U.S. 199 (1974) ......................... 8

Motor Vehicle Mfgrs. Assn. v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29 (1988) ..................... 15, 18, 24

National Farmers Org. v. Lyng, 695 F. Supp. 1207

CST gli | BEAN een PR A 5 48 ELIE REN IMOE 25

NBC v. United States, 319 U.S. 190 (1948) _........... 8

New Jersey v. EPA, 626 F.2d 1038 (D.C. Cir.

I Ra eee ARES OSS TIENT Sex Lk ULE een 22

NLRB v. Wyman-Gordon Co., 394 U.S. 759 (1969) .. 7-8

P.A.M. News Corp. v. Hardin, 440 F.2d 255 (D.C.

RR RIED ccacconicanceinsvadenmashiesakinaeean nas aaeaaa ne bec anancaes 23

Pickus v. U.S. Bd. of Parole, 507 F.2d 1107 (D. C.

+ \ rN One IN Ae De 0 TI 15

Rivera v. Patino, 524 F. Supp. 136 (N.D. Cal.

BUT Dc nccsson ces tecacidgn sesicdaciababsceusa ia aaneni seein lindane 2

Rodway v. USDA, 514 F.2d 809 (D.C. Cir. 1975) .. 22

Riverbend Farms v. Madigan, 958 F.2d 1479 (9th

ee, GE on cca ace passim

Sagebrush Rebellion, Inc. v. Hodel, 790 F.2d 760

(ge) | Sa NCAR ieee PY tere Pep tan ii re 9

San Diego Air Sports Center v. FAA, 887 F.2d 966

Co A __, SARRRRR NE a Bh oN rnd neat ots 8 22

Sharon Steel Corp. v. EPA, 597 F.2d 377 (3d Cir.

UPPTIR sissinrniciincinchanishldinopehbilesetia akc teen neta ee aunnseas iatical 21

Shell Oil Co. v. EPA, 950 F.2d 741 (D.C. Cir.

1991) ...... POE nem AGadenkee et 9 LI toe ee 23

Shelton v. Marsh, 902 F.2d 1201 (6th Cir. 1990) __. 9

Small Refiner Lead Phase-Down Task Force v.

EPA, 706 F.2d 506 (D.C. Cir. 1983) ..................... 21, 23

Southern California Aerial Advertisers’ Associa-

tion v. FAA, 881 F.2d 672 (9th Cir. 1989) _..... 22

State of Alaska v. U.S. Dept. of Transportation,

Pf BE Rete: | Pern 22

Vii

TABLE OF AUTHORITIES—Continued

Page

State of South Carolina ex rel. Patrick v. Block, 558

F. Supp. 1004 (D.S.C. 1983), rev’d on other

grounds, 717 F.2d 874 (4th Cir. 1983), cert. den.,

WD Tits BOO CRD voviccdvckciesccescecss cc 23

Texaco v. FPC, 412 F.2d 740 (3d Cir. 1969)... 23

U.S. Steel Corp. v. EPA, 595 F.2d 207, rehearing

and clarification denied, 598 F.2d 915 (5th Cir.

i | eRe snsth iailsiidadigalbcGamsaeadnadin teak aici eter de rene 22

United States v. Nova Scotia Food Products Corp.,

_ 568 F.2d sia ol Cir. gS FERRE A tesa a ee ene 18

1989) aauinessbldsridetiadabekete tel aeiceoasaamadnikc sae ta eet ae 22

United States v. Reinis, 794 F.2d 506 (9th Cir.

2 SSCA See ee ct Namah le Ue ROE RA oe 22

Vermont Yankee Nuclear Power Corp. v. NRDC,

BUF SF HR COTE cenicsnseemreccnenbnncs ee es 7,15

W.C. v. Bowen, 807 F.2d 1502 (9th Cir. 1987),

rehearing denied and opinion amended, 819 F.2d

zo? (1968) .............. ETE EDIT os ~ N Bede EMD 22

Walter A. Holm & Co. v. Hardin, 449 F.2d 1009

Sate Sie ROPER Rc een 10. 15, 22, 25

Weyerhauser v. Costle, 590 F.2d 1011 (D.C. Cir.

2 RR RUS CEI EE SR ADs Scare ee EEC RIN ara RSME TE 22

Statutes:

5 U.S.C. §

5 U.S.C. § 55

5 U.S.C. §§ “tid | SOR Sia ites DA Aa eae Bet Bie

5 U.S.C. §

5 U.S.C. § 553(b) (3) (B) SRN inn 2 DL Paseo as 4,14

Sp tie ee Ny ee tn 18

P areeea Oe Ce 24

5 U.S.C. § 706(2) (A) and (D)

5 U.S.C. § 706 (2) (D) ...... Be BRON iS ba oe as ka Aa ONE

Soe EE ike

7 U.S.C. § 601, et seq. ................. eT MOR ea ns

Te I ok ee ey |

7 U.S.C. §

NNN NK DY RP DLO

7 U.S.C. § 602 (4) ........ wie AAR Ren ONS ADEN ae NOR AE

7 U.S.C. §

Viii

TABLE OF AUTHORITIES—Continued

Page

De I econticrihncsinenicinsocenpgninstccennceee Sohne eee 28

FF Ee ite NE GD iccticciestneniecosseccterinreictneteinscanacenmmnnts 2,4

eee ED siveticistcicicomstnitnneonnentierinntloacnnanton 2

Fe ee CE ici iis cinecesceescncetnennncnitccansanes 17

IE soci csnasccacikane> cenisawchaibemecinaansnnnniniensein 2

(Bos Poh so Te S eens Sates 2

kin Ff 5) ence enn EET 1

31 U.S.C. § 3729, et seq. (False Claims Act) -............ 29

Regulations:

Le Sk SPIN ARTES eee dunt cep ana Pe nt nuenen 2

nc acrseeteaneipniaoiacesiecnawnad 3

fk © 33s 5 RRR RRR senvenNe ce enema COR 8, 27

/fo8 5 +: 2) 1 RRR een eppsteernerceerrer yess 27

Bo sinecchersstscinesipdonseciodtetaaapssabsinndineonietinas 2

ree I ies ccerad cass acennenesiuhiensnecnninirineniateonsiont 2

Be ii cetectianhashsesasmitntctanterscninennwe 3

44 Fed. Reg. 28474, 28479 (May 15, 1979) ............-.-. 11

45 Fed. Reg. 31953 (May 15, 1980) ........................-.-. 11

45 Fed. Reg. 75454, 75455, 75457 (Nov. 14, 1980) -_.. 11

46 Fed. Reg. 23872, 23873 (Apr. 28, 1981) ................ 11

49 Fed. Reg. 29071, 19076 (July 18, 1984) —........... eh 11

49 Fed. Reg. 48265 (Dec. 12, 1984) ........................---- 26

3 me Th S| Eee nenerere 26

50 Fed. Reg. 39132 (Sept. 27, 1985) -.......................--. 5

51 Fed. Reg. 35517 (Oct. 6, 1986) ...........................---. 5

52 Fed. Reg. 38431 (Oct. 16, 1987) ........................----- 5

52 Fed. Reg. 41602 (Oct. 30, 1987) ...................-----.. ; 5

53 Fed. Reg. 45309 (Nov. 9, 1988) ........................------ 5

53 Fed. Reg. 49649 (Dec. 9, 1988) ........................-.---- 5

54 Fed. Reg. 42966 (Oct. 19, 1989) .........................-..- 5

54 Fed. Reg. 46359 (Nov. 3, 1989) ..........................---- 5

55 Fed. Reg. 36653 (Sept. 6, 1990) ...........................-- 5

55 Fed. Reg. 50157 (Dec. 5, 1990) _............... eer ee 5

56 Fed. Reg. 49432 (Sept. 30, 1991) _..........--...--..-.....- 5, 13

56 Fed. Reg. 61109 (Dec. 2, 1991) .........................-...-. 14

56 Fed. Reg. 64188 (Dec. 9, 1991) .............2..-2...22.22.--- 14

56 Fed. Reg. 66341 (Dec. 23, 1991)..........................--- 14

57 Fed. Keg. 1216 (Jan. 13, 1992) ............................... 14

57 Fed. Reg. 4691 (Feb. 7, 1992).................-------cesee00+- 5,13

TABLE OF AUTHORITIES—Continued

Legislative:

Administrative Procedure, Hearings Before a Sub-

committee of the Committee on the Judiciary,

United States Senate, on S. 674, S. 675, and

S. 918, 77th Cong., 1st Sess. at 1506-07, 1514-15

(1941) (statement of Ashley Sellers, USDA,

Office of the Solicitor) 000000

Law (Pike & Fisher) 3d, Desk Book at 3-104

em Bee Ted ne

hci ntnicns aotaniiaciigiee iene

Other:

Agribusiness Associates, Economic Analysis of Vol-

ume Controls, California-Arizona Navel Orange

Marketing Order (1985) sits

General Accounting Office, The Role of Federal

Marketing Orders in Establishing and Maintain-

ing Orderly Marketing Conditions. [RCED 85-

or) (duly $1, 1906) bly APR ST

Jesse & Johnson [Agric. Econ. Rpt. No. 471, Tr.

Ex. 41], Effectiveness of Federal Marketing Or-

ders for Fruits and Vegetables |) ee

Kozinski, “The Dark Lessons of Utopia,” 58 U.

Chi. L. Rev. 575, 585 (1991)...

and Marketing Order Policy for Fresh Navel

Oranges,” 60 American Journal of Agricultural

Economics 502-09 (August, ie

TABLE OF AUTHORITIES—Continued

Office of Management and Budget. “Agricultural

Marketing Orders” (2/18/82) ..................-.----------

Powers, “Prices and Shipments During Prorate

and Prorate Suspension for the California-

Arizona Navel Orange Federal Marketing Or-

der,” Citrus Fruits Situation and Outlook (Feb.

DIGBY acces saceeatinasccoencanenssencentouscesasersnsensmnsmsanenqsnebentensast

Shepard, “Cartelization of the California-Arizona

Orange Industry 1934-81,” 29 Journal of Law

and Economics 83-123 (1986) ...................--..--++++++-

Thor & Jesse [Tech. Bull. 1664, Tr. Exs. 39 & 40],

Economic Effects of Terminating Federal Mar-

keting Orders for California-Arizona Oranges

¢ | ) EE

USDA, Agricultural Marketing Service, (“Study

Team Report”) [Agric. Econ. Rpt. No. 477], A

Review of Federal Marketing Orders for Fruits,

Vegetables, and Specialty Crops—Economic Effi-

ciency and Welfare Implications (1981) ...............

USDA, Guidelines for Fruit, Vegetable and Spe-

cialty Crop Marketing Orders (Jan. 25, 1982

May 8, 1983), reprinted in, General Accounting

Office, The Role of Federal Marketing Orders in

Establishing and Mantaining Orderly Marketing

Conditions. [RCED 85-57] (July 31, 1985)

USDA August 25, 1989 press release ........... En .

Page

PETITION FOR A WRIT OF CERTIORARI

Petitioners Riverbend, Belridge, Sunny Cove, Sequoia

and Exeter, all shippers of navel oranges grown in Cali-

fornia, pray that a writ of certiorari issue to review the

decision and judgment of the U.S. Court of Appeals for

the Ninth Circuit issued in this case on March 17, 1992.

OPINIONS BELOW

The unpublished May 31, 1989 opinion granting Peti-

tioners’ motions for summary judgment of Judge Price,

Eastern District of California, may be found at App.

22a-33a. Judge Price’s unpublished March 22, 1990 opin-

ion denying USDA’s motion for reconsideration may be

found at App. 19a-2la. The Ninth Circuit’s March 17,

1992 opinion affirming in part, reversing in part, and

remanding the case to Judge Price is reported at 958

F.2d at 1479, and may be found at App. la-18a.

JURISDICTIONAL STATEMENT

The Ninth Circuit’s judgment was entered on March

17, 1992. A timely petition for rehearing and suggestion

for rehearing en bane was denied on June 9, 1992. This

Court has jurisdiction to hear this petition for a writ of

certiorari pursuant to 28 U.S.C. § 1254/1).

STATUTES AND REGULATIONS

The regulations challenged by Petitioners are navel

orange shipment quotas imposed during the 1975-85 sea-

sons. These quotas, a typical example being 50 Fed. Reg.

® (Jan. 2, 1985), App. 50a-52a, were imposed by the Sec-

retary of Agriculture under Marketing Order .907, 7

C.F.R. § 907 (“Order”), App. 40a-49a, which was issued

under the Agricultural Marketing Agreement Act of

1937, 7 U.S.C. § 601, et seg. (“AMAA”). App. 36a-40a.

The Ninth Circuit found that the Secretary violated the

‘Pursuant to Rule 14.1(b). all parties in the court below are

listed in the caption. Pursuant to Rule 29 1, none of the corporations

listed in the caption has a parent and none has any subsidiaries that

are not wholly-owned.

procedural safeguards in the Administrative Procedure

Act (“APA”), 5 U.S.C. $$ 553(b), (c), App. 34a-35a.

The judicial review authority is found in $§ 706(2) (A)

and (D) of the APA, App. 35a-36a. The “prejudicial

error” rule is found at § 706(F), App. 36a. Limitations

on the Secretary’s exercise of discretion to impose quotas

are found at 7 U.S.C. § 608¢(16) (required termination

of ineffective or obstructionist regulations), § 608¢(6) (C)

(quotas must be equitable and imposed under a uniform

rule) ; and § 608¢c(11)(C) (quotas must account for re-

gional differences in production and marketing condi-

tions), App- 38a-40a.

STATEMENT OF THE CASE

Congress authorized the Secretary to issue regulations

called marketing orders containing a variety of regula-

tory tools designed to deal with various forms of market

failure. The navel Order authorizes seasonal and weekly

quotas on the quantity of oranges each handler may ship

to the domestic market, including Canada. Both the

quotas and the Order itself are discretionary. The Secre-

tary may only impose quotas if he finds they are neces-

sary to restore order to a disrupted market, i.e., a market

characterized by “unreasonable fluctuations in supplies

and prices.” 7 U.S.C. § 602(4), 7 C.F.R. § 907.52. If

used, quotas must also improve growers’ economic well-

being, i.e. restore them to “parity” with other sectors in

the economy, 7 U.S.C. § 602(1), at a rate that “protect(s|

the interest of consumer|s]” by “gradual correction” of

prices, 7 U.S.C. § 602(2). In evaluating the potential for

“unreasonable fluctuations in supplies and prices,” 7

U.S.C. § 602(4), the Secretary must consider “the inter-

ests of producers and consumers.” And in assessing the

potential for the “disruption of the orderly marketing,”

7 U.S.C. § 602(5), of navel oranges, his decision to regu-

late or not must be measured against a “public interest”

standard. Quotas must not be imposed if not needed to

restore order'y marketing, or if their use would actually

impair the order'y functioning of an unregulated market.

7 U.S.C. § 608¢(16) (A) ; 7 C.F.R. § 907.83 (b).

The Order establishes a private-sector Navel Orange

Administrative Committee to assist the Secretary which

is controlled by Sunkist Growers, Inc., Petitioners’ larg-

est competitor. NOAC filed its annual recommendation

for quotas, called a marketing policy, 7 C.F.R. § 907.50,

prior to the beginning of each season. These contained a

seasonal quota, § 907.50(a) (2), a shipping schedule that

apportioned the quota on a weekly basis, § 907.50(a) (3),

and a formula that allocated the weekly quota among

regions in California and Arizona, called districts under

the Order, 7 C.F.R. § 907.110. During the seasons at

issue in this case, the Secretary approved these recom-

mendations prior to the beginning of each season. Modi-

fications to the weekly quotas set forth in NOAC’s mar-

keting policy and approved in USDA’s position paper

were sometimes proposed by NOAC at its Tuesday meet-

ings (in the range of 1-5%) and always approved the

next day by USDA.

Season-long quotas have been used continuously since

the 1936-37 season. There were no quotas during the

1952-53 season because the industry was in the process

of separating the quota program for oranges into separate

programs for navel (winter) oranges (Order 907) and

Valencia (summer) oranges (Order 908). Starting in

1975 the Secretary began phasing out quotas in Southern

and Northern California and in Arizona. By the 1982-83

season, there were no quotas in these areas. The only

remaining regulated area was the San Joaquin Valley.

Oranges produced elsewhere in the country (Texas and

Florida) and imported from abroad have never been sub-

ject to shipment quotas.

Starting in the late 1970’s, an increasing number of

independent shippers began to doubt the continued efficacy

of shipment quotas, believing they simultaneously caused

over-production and under-marketing, that they reduced

rather than increased growers’ revenue and stimulated

competition from areas outside the Order, that they dis-

criminated against independents in the San Joaquin Val-

ley, and they were no longer needed to maintain “order”

in the market because of significant changes in produc-

tion and marketing conditions since the Depression.

The first administrative petition was filed October 29,

1980. Following an administrative trial in October, 1985,

the Chief ALJ issued his April 23, 1987 decision, Ninth

Circuit Ex. Rec. Tab 1, finding that the Secretary vio-

lated the notice-and-comment provisions of the APA by

improperly claiming the § 553(b) (3) (B) “good cause”

exception in issuing quotas during the 1975-76 through

1984-85 seasons, and that the Secretary acted arbitrarily

and capriciously by failing to explain his continued im-

position of rigid quotas in the San Joaquin Valley while

phasing them out elsewhere. Following the Secretary’s

January 29, 1988 reversal of this decision, Ninth Circuit

Ex. Rec. Tab 2. Petitioners filed suit in district court.

The District Court agreed with the ALJ that the Secre-

tary had violated the procedural safeguards of the APA,

but rejected Petitioners’ statutory challenge that the

quotas violated the “equity” and “uniform” rule require-

ments of 7 U.S.C. § 608¢(6) (C).

Both Petitioners and USDA appealed. The Ninth Cir-

cuit affirmed the District Court:

We thus conclude that the Secretary’s rulemaking

fails to satisfv the APA’s requirements because he

has not demonstrated good cause for failing to give

sufficient notice in the Federal Register of the weekly

NOAC meeting and failing to allow the public to com-

ment by means other than personal participation at

the NOAC meeting.

App. lla.

The legal consequence of the Court’s conclusion should

have been to void the quotas pursuant to the Congressional

imperative to judges in the APA that “|t]he reviewing

court shall... hold unlawful and set aside agency action

_.. found to be... without observance of procedures re-

quired by law.” 5 U.S.C. § 706(2)(D). Contrary to the

teachings of this Court, Congressional intent, and deci-

sions from other circuits, the Court held that the quotas

remained enforceable. App. 1la-13a.

The Court mistakenly focussed on the conduct of Peti-

tioners in excusing USDA noncompliance with the APA

despite the fact that agency rules carry the “force of law”

only if the agency has complied (which the Court cor-

rectly found it had not) with all the substantive and pro-

cedural requirements imposed by Congress. The Court

relied on three considerations: (1) USDA’s long-standing

practice of imposing quotas without § 553 public partici-

pation; (2) invalidation of past quotas would permit Peti-

tioners to succeed in forfeiture proceedings brought

against them by the Secretary for allegedly exceeding the

quotas; and (3) Petitioners had a chance to participate

in weekly NOAC meetings.

The Secretary never followed the notice-and-comment

provisions of § 553(b) until just prior to the administra-

tive trial in this case.” These initial comment opportuni-

ties were illusory because USDA specificaliy disavowed *

the APA-guaranteed right to “participation” in the rule-

making process, i.e. the rights to have comments consid-

ered by and responded to by the decisionmaker. It wasn’t

until after the March 22, 1990 District Court denial of

USDA’s motion for reconsideration that the Secretary

finally began complying with the participation and rea-

soned decisonmaking requirements of § 553(c).4

“50 Fed. Reg. 39132 (Sept. 27, 1985). Despite over 1200 weekly

“emergencies” over the previous 40 seasons, USDA sought public

comment for the first time. While the litigation was continuing,

USDA continued to seek public comment for the next four seasons.

51 Fed. Reg. 35517 (Oct. 6, 1986); 52 Fed. Reg. 38431 (Oct. 16,

1987); 53 Fed. Reg. 45309 (Nov. 9, 1988); 54 Fed. Reg. 42966

(Oct. 19, 1989). In fact, for the 1987-88 through 1989-90 navel sea-

sons, USDA even issued the first weekly quota regulation as an

interim final rule with an additional request for comments. 52 Fed.

Reg. 41602 (Oct. 30, 1987); 53 Fed. Reg. 49649 (Dec. 9, 1988);

54 Fed. Reg. 46359 (Nov. 3, 1989).

3“Publication of this summary of the marketing policy does not

create any legal obligations, either substantive or procedural.” E.g.,

50 Fed. Reg. 39132 (Sept. 27, 1985).

155 Fed. Reg. 36653 (Sept. 6, 1990) (proposed rule), 50157 (Dec.

5, 1990) (final rule) ; 56 Fed. Reg. 49432 (Sept. 30, 1991) (proposed

rule), 57 Fed. Reg. 4691 (Feb. 7, 1992) (final rule).

ARGUMENT

1. Review shou'd be granted because the Ninth Circuit

has decided an important question of federal law contrary

to all prior decisions of this Court that regulations carry

the “force of law” only if promulgated according to pro-

cedures required by law. This Court has never ruled on

the applicability of the “prejudicial error” escape clause

to agency failures to comply with the procedural safe-

guards in $553 of the APA. On numerous instances it

has indicated that compliance with the minimum require-

ments of $553 is a necessary condition precedent to

agency regulations having the “foree of law.” This case

presents the Court with the opportunity to draw a clear

line distinguishing enforceable rules from those which

are void ab initio and unenforceable in instances such as

this case where the agency did not follow § 553 proce-

dures. A clear statement from this Court will protect

the efficacy of rules promulgated in compliance with § 553

and will also ensure that the procedural safeguards es-

tablished by Congress are not unduly eroded by an excep-

tion swallowing the rule.

“It has been established in a variety of contexts that

properly promulgated, substantive agency regulations have

the ‘force and effect of law.’”’ Chrysler Corp. v. Brown,

441 U.S. 281 (1979). This Court held that a rerulation

authorizing the disclosure of records otherwise exempt

under the Freedom of Information Act was invalid be-

cause it was not issued pursuant to authority delegated

by Congress and because it was infected by a procedural

defect, failure to publish the rule and provide for com-

ment as required by § 553 of the APA:

In order for a regulation to have the “force and effect

of law,” it must have certain substantive character-

istics and be the product of certain procedural requi-

sites... . That an agency regulation is “substan-

tive,” however, does not by itself give it the “force

and effect of law.’ The legislative power of the

United States is vested in the Congress, and the exer-

cise of quasi-legislative authority by governmental de-

partments and agencies must be rooted in a grant of

such power by the Congress and subject to limitations

which that body imposes. ... Likewise, the promul-

gation of these regulations must conform with any

procedural requirements imposed by Congress.

For agency discretion is limited not only by substan-

tive, statutory grants of authority, but also by the

procedural requirements which “assure fairness and

mature consideration of rules of general application.”

NLRB v. Wyman-Gordon Co., 394 U.S. 759, 764

(1969). The pertinent procedural limitations in this

case are those found in the APA.

Id. at 301-03.

Comparing the failure to publish the disclosure rule at

issue with the court-imposed procedures found unlawful

in Vermont Yankee Power Corp. v. NRDC, 435 U.S. 519

(1978), this Court observed:

It is within an agency’s discretion to afford parties

more procedure, but it is not the province of the

courts to do so.... Courts upset that balance [“ ‘be-

tween opposing social and political forces,’ ”’ Vermont

Yankee, 435 U.S. at 547, quoting Wong Yang Sung

v. McGrath, 339 U.S. 33, 40 (1950)] when they over-

ride informed choice of procedures and impose obli-

gations not required by the APA. By the same token,

courts are charged with maintaining the balance: en-

suring that agencies comply with the “outline of

minimal essential rights and procedures” set out in

the APA. H.R. Rep. No. 1980, 79th Cong., 2d Sess.

16 (1946)... . Certainly regulations subject to the

APA cannot be afforded the “force and effect of law”

if not promulgated pursuant to the statutory proce-

dural minimum found in that Act

Id. at 313. Under Vermont Yankee, courts may not im-

pose additional procedural requirements,® but under

5“'Niothing in the APA .. . entitled the court to review and

overturn the rulemaking proceeding on the basis of the procedural

devices employed (or not employed) ... so long as the [agency |

employed at least the statutory minima... .” 435 U.S. at 549. “Of

course, the court must determine whether the agency complied with

the procedures mandated by the relevant statute.” Jd. n.21.

Chrysler, courts must insist on agency adherence to the

minimum requirements specified by Congress. Together,

these cases teach that courts must insist on strict com-

pliance with the APA procedural safeguards.

The agency had argued that the disclosure regulation

was an interpretative rule and therefore exempt from

public participation under § 553(b) (3) (A). This Court

said it didn’t matter whether the rule was interpretative

or substantive because it could not have the “force of

law” because it was not promulgated with public par-

ticipation:

It is enough that such regulations are not properly

promulgated as substantive rules, and therefore not

the product of procedures which Congress prescribed

as necessary prerequisites to giving a regulation the

binding effect of law... . With the [agency] consid-

eration that is the necessary and intended conse-

quence of such procedures, [the agency] might have

decided that a different accommodation was more ap-

propriate.

Id. at 315-16 (citations omitted). Cf. Morton v. Ruiz, 415

U.S. 199, 232 (1974) (eligibility requirement published

in staff manual cannot have the “force of law’ because

not published in accord with APA); NLRB v. Wyman-

Gordon Co., 394 U.S. 759, 764 (1969) (agency cannot

impose legislative rule through adjudication); see also,

e.g., NBC v. United States, 319 U.S. 190, 224-25 (1943)

(upholding “chain broadcasting” rules in part because

“there |was] no basis for any claim that the Commis-

sion failed to observe procedural safeguards required by

law.”’).

This Court implicitly rejected a “no prejudicial error”

defense in Bowen v. Georgetown University Hospital, 488

U.S. 204 (1988). The agency, HHS, reissued in 1984 a

rule concerning Medicare cost reimbursement methodology

that had previously been invalidated for failure to comply

with notice-and-comment procedures. This Court struck

down HH§’s attempt to make the new validly-promulgated

rule retroactive to 1981 for lack of Congressional au-

thorization and because the APA normally limits rules to

prospective application. HHS argued that it was not un-

fair to make the rule retroactive because it simply cured

a procedural defect and the earlier invalidated rule pro-

vided “‘ample notice” to hospitals of the standard that

would be applied. Correctly focussing on the agency’s

“mistake” rather than fairness to or knowledge of the

parties (as did the Ninth Circuit in this case), Justice

Sealia explained that judicial acceptance of HHS’s “cure”

would eviscerate the APA:

I fully agree with District of Columbia that accept-

ance of the Secretary’s position would “make a mock-

ery ... of the APA,” since ‘agencies would be free

to violate the rulemaking requirements of the APA

with impunity if, upon invalidation of a rule, they

were free to ‘reissue’ that rule on a retroactive basis.”

Id. at 225 (Scalia, J., concurring), quoting Georgetown

University Hospital v. Bowen, 821 F.2d 750, 758 (D.C.

Cir. 1987).

This case provides the Court with the opportunity to

explicitly state that agency compliance with Congression-

ally mandated procedural safeguards is a condition prece-

dent to a rule having the “force of law,” and that such

compliance cannot be conditioned, undermined, or excused

by a judicially-created requirement that challengers prove

prejudice beyond denial of the statutory right.*

2. Failure to grant review would leave a clearly erron-

eous, indeed dangerous, decision in place. Such an escape

® An explicit holding requiring that rules issued without follow-

ing the procedural safeguards of § 553, as in the present case, are

invalid and do not have the “force of law” would not read the

“prejudicial error” rule out of the APA, and would not threaten

the holdings in cases upholding rules when there was a mere techni-

cal noncompliance, i.e. when th. record demonstrates that the pur-

poses of § 553 were met through other means. See, e.g., Shelton v.

Marsh, 902 F.2d 1201 (6th Cir. 1990) ; Sagebrush Rebellion, Inc. v.

Hodel, 790 F.2d 760 (9th Cir. 1986); County of Del Norte v. US.,

732 F.2d 1462 (9th Cir. 1984). The purposes of advance notice

were served in each of these cases because public participation was

a reality, i.e. comments were received by and responded to the agency.

clause would encourage agencies to erode, if not ignore,

procedural safeguards in the hope that their rules would

be less subject to judicial scrutiny and reversal. The

agency’s obligation in the first instance is to justify the

resulting rule by complying with the procedures and sub-

stance of reasoned decisionmaking. The Ninth Circuit’s

decision turns this obligation on its head. This decision

places a burden on challengers to prove to a reviewing

court that the result an agency reached would have been

different. With the procedural safeguards effectively evis-

cerated by the Ninth Circuit, the balance struck in the

APA is upset. Because courts are overworked, this de-

cision will encourage agencies to be quite inventive in

their descent to minimal compliance, or, as in this case,

noncompliance with procedural safeguards. App. lla. By

blurring the bright line of which regulations have the

“force of law,” the decision will increase uncertainty and

litigation, and will render compliance and enforcement

more difficult. USDA’s extreme bad faith in the present

case illustrates the risks to the efficacy of the decision-

making process if this erroneous decision is allowed to

stand.

a. Congress intended agencies to strictly comply with

procedural safeguards. This decision will further encour-

age agencies to engage in all manner and variety of

“forms of indirection.’’ Congress admonished the courts

to prevent such actions which have a powerful tendency

to avoid or diminish public participation and evade mean-

ingful judicial review.

This case graphically demonstrates the extremes to

which an agency will go to evade substantive scrutiny by

avoiding procedural safeguards. The harm done by

USDA may also be demonstrated by its flagrant and re-

peated disregard of procedures it knew were required by

law. See Walter A. Holm v. Hardin, 449 F.2d 1009 (D.C.

Cir. 1971). Like an ostrich, USDA struck its head in the

sand and deliberately avoided creating a record for ju-

dicial review because it knew that quotas could no longer

be justified in light of changed production, marketing and

competitive conditions since the quota program began in

1935. When Congress passed the APA, it refused USDA’s

request for a blanket exemption from the APA’s notice

requirements.’ In its request, USDA even cited the orange

quota program at issue here. USDA’s annual pre-season

approval of the quotas* was designated a “major ule”

which, under USDA’s internal regulation (Secretary’s

Memorandum 1512-1) and Executive Order 12044, 12291,

and 12498, required heightened public participation and

analytical requirements.” USDA did provide public par-

ticipation for all volume control programs except for the

three Western Citrus orders. The Secretary finally con-

ceded '’ that public participation was required prior to

approving each season’s quota program, but, at least until

7 Administrative Procedure, Hearings Before a Subcommittee of

the Committee on the Judiciary, United States Senate, on S. 674,

S. 675, and S. 918, 77th Cong., Ist Sess. at 1506-07, 1514-15 (1941)

(statement of Ashley Sellers, USDA, Office of the Solicitor, com-

ments 4 and 11).

8 App. 3a, 10a n.5, 13a, 25a. See, e.g., November 18, 1981 letter

from Secretary Block to NOAC Chairman Canham (Trial Ex, 379)

(“I have approvad the marketing program for Order No. 907 for

the 1981-82 season, including the prorate feature provided for in

Order 907.) ; see also Tr. 1745-46, 1797, 1838.

9 See, e.g., 44 Fed. Reg. 28474, 28479 (May 15, 1979) (designation

of USDA’s approval of 1979-80 marketing policy as significant rule-

making action, but comments never solicited thereon) ; 45 Fed. Reg.

75454, 75455, 75457 (Nov. 14, 1980) (1980-81 quota program,

same): 46 Fed, Reg. 23872, 23873 (Apr. 28, 1981) (weekly quota

regulation noting completion of approval process); 45 Fed. Reg.

31953 (May 15, 1980) (noting designation of 1979-80 marketing

policy approval as “significant” under provisions of E.O. 12044);

USDA annual position papers approving annual quota program

(Trial Exs. 694-701: Ninth Circuit Ex. Rec. at Tab 4) (approving

annual quota programs without public participation).

10 49 Fed. Reg. 29071, 29076 (July 18, 1984) (“[T]he purpose of

publishing a summary of the marketing policy is to gather informa-

tion from the public to aid the Depar‘ment in evaluating the mar-

keting policy. Public comment on the published marketing policy

summary will be requested well in advance of the beginning of the

shipping season. The Department intends to compete its analysis

of the marketing policy, and any public comment thereon, prior to

the beginning of the season.’’).

the 1990-91 season, he has ignored all such input as evi-

denced by not one mention of it in the Federal Register

quota notices. USDA adopted Guidelines in January,

1982, and May, 1983, calling for a gradual reduction of

season-long quotas, but all subsequent Federal Register

quota notices were completely silent as to compliance with

these Guidelines. The record is replete with examples (all

ignored by the Ninth Circuit) of comments and data sub-

mitted by Petitioners to which USDA never responded."

It would be hard to imagine a case less appropriate for

the “prejudicial error” rule. Not only would the proce-

dures used by USDA have been different had USDA not

illegally invoked the “good cause” exception, but the sub-

stance of the quota decisions reached would assuredly

"See, e.g., Trial Exs. 111-113, 118-121, 159-66, 187-90, 301-02,

304-05, 436-437, 438, 445-50 and 758 (noting unexplained change in

definition of “normal marketing season” from seven to nine months) ;

758, attachment (quotas inconsistent with AMAA policy in that

they have failed to achieve and maintain parity prices, reduced per

capita consumption, increased diversion to unprofitable byproducts

and increased inequity among growers). These were all letters and

studies sent to USDA by Petitioner Sequoia, even though USDA

had not published notice or asked for comments, seeking data on

which the quota proposals were based, definiiton of key regulatory

terms and decision criteria such as the level of price and supply

fluctuations deemed “unreasonable,” citing studies and data showing

the harm caused by quotas, demanding public participation, and

opposing specific aspects of the quota program. Perhaps one of the

most revealing letters is Sequoia’s 9/23/85 letter to the Fruit Branch

Chief. It compared the production and marketing factors for the

upcoming season with the season just ended. It cited the conclusion

of a USDA study that the eliminatton of quotas during the second

half of the 1984-85 season did not disrupt markets. The letter also

sought the right to participate in USDA’s approval of the 1985-86

marketing policy. USDA marked the letter (received during pre-

trial discovery) ‘no reply necessary,” and provided absolutely no

response to comments on 1985-86 quota plan. These unresponded to

comments are discussed in more detail by the Chief ALJ in his deci-

sion granting relief, ALJ. Dec. (Ninth Circuit Ex. Rec., Tab 1) at

29-43, and in the Secretary’s decision denying relief, J.O. Dec.

(Ninth Circuit Ex. Rec., Tab 2) at 191-99. These comments were

completely ignored by the Ninth Circuit in its haste to excuse the

Secretary’s noncompliance with the APA.

have been different. First, USDA would have had to con-

sider and respond to the comments. Second, USDA would

have had to analyze the studies and data in its own files.

These show that quotas were not needed and had effects

contrary to the interests of growers.

USDA began requesting comments on the annual mar-

keting policies for the 1985-86 season, coincident with

the October, 1985 trial in this case. The fact that quotas

have been imposed during significantly fewer weeks

since that date demonstrates that real public participa-

tion prior to 1985 would have made a difference in

USDA’s “result, thus undermining any contention that

the procedural error was “harmless.” There has been

both an increase in total domestic fresh sales ‘* and in-

dustry revenue."* For the 1991-92 navel season, USDA

requested comments on the need for quotas, the domestic

fresh allocation, shipping schedule, and the formulae for

allocating quota among districts. 56 Fed. Reg. 49432

(Sept. 30, 1991). In response to overwhelming criticism

of quotas in the comments, including the Justice Depart-

ment, the Small Business Administration, consumer

groups, and nearly all independent shippers, USDA in-

creased the weekly quota recommended by NOAC during

four weeks, albeit without any explanation or analysis."

12 During the 1985-86 through 1991-92 seasons, excluding the 1990-

91 freeze season, quotas were imposed on District 1 during an aver-

age of 18 weeks, six weeks less than the average during the 1979-80

throuch 1984-85 seasons, a reduction of 25%.

13 During the 1985-86 through 1991-92 seasons, excluding the 1990-

91 freeze season, domestic fresh sales averaged 47,917,000 cartons,

4,877,000 cartons greater than the average during the 1979-80

through 1984-85 seasons of 43,040,000 cartons, an increase of 11%.

4 During the 1985-86 through 1991-92 seasons, excluding the

1990-91 freeze season, industry domestic fresh revenue averaged

$350,903,000, $87,064,000 greater than the average during the 1979-

80 through 1984-85 seasons of $263,839,000, an increase of 33%.

1 The February 14, 1992 termination of quotas only one week

after issuance of the final rule, 57 Fed. Reg. 4691 (Feb. 7, 1992),

more than three months earlier than recommended by NOAC, is

further evidence that comments are performing their intended func-

56 Fed. Reg. 61109 ‘Dec. 2, 1991), 64188 (Dec. 9, 1991),

66341 (Dec. 23, 1991), 57 Fed. Reg. 1215 (Jan. 13,

1992!. No quotas have been imposed on Valencia oranges

since the 1986 season. Following the first bona fide re-

quest for comments on the need for lemon quotas, quotas

have not been imposed since January, 1991.

b. The Ninth Cireuit’s abrupt and unexplained depar-

ture from the “bright line” test in Buschman v. Schivei-

ker, 676 F.2d 352 (9th Cir. 1982),’* will embroil the

courts on a case-by-case basis in a fact-specifie party-

dependent romp through complex records and increasingly

disparate agency decisionmaking processes in order to de-

termine if there was enough “prejudice” to invalidate the

challenged rules. App. 9a. The erroneous decision in this

case demonstrates the folly of dragging the courts into

rebalancing this portion of the government-society rela-

tionship already decided upon by Congress when it con-

ditioned agency rulemaking on observance of the proce-

dural safeguards in § 553.

The Court first assumed that the shippers had actual

notice of the preposed quotas and that they “knew the

ground rules.” '* App. 13a. There is no evidence in the

record that the shippers knew about USDA’s pre-season

approval process, and of course none that they were al-

lowed to participate in that process, as the APA man-

dates." At the 1985 trial, USDA introduced no evidence

tion of educating decisionmakers as to the harmful! effects of quotas.

57 Fed. Reg. 5975 (Feb. 19, 1992) (“The Department has con-

cluded that at this time, regulation is not necessary to effectuate

the declared policy of the Agricultural Marketing Agreement Act of

1937."").

'® The Court invalidated welfare calculation methedology because

HHS improperly relied on “good cause” exception in § 553(b)(3)(B).

“In light of the importance of the notice & comment procedure,”

failure to provide it can never be harmless error. 676 F.2d at 356-58.

~The Supreme Court rejected a similar contention in Bowen v.

Georgetown University Hospital, 488 U.S. 204, 225 (1988) (Scalia.

J., concurring).

'’ The Court correctly concludes that USDA approved each sea-

son’s quota program prior to the beginning of the season. App. 3a,

whatsoever. Even if there had been adequate notice, such

notice is just the beginning of the public participation

process, which includes ‘all absent in the present case)

the opportunity to infiuence the decisionmakers (1.e.,

USDA, not NOAC), and reasoned consideration of com-

ments and alternatives by the decisionmakers, as demon-

strated by the agency explanation and justification in the

basis and purpose statement.’’ Just because there were

NOAC meetings, it was not de jure a foregone conclusion

that there would be quotas. There was no evidence that

anything said at a NOAC meeting was “before” or con-

sidered by the actual decisionmakers. It would be even

more damning for the quotas if such comments were ac-

tually “before” the decisionmakers becaus they were “ever

responded to in the final rules, either by the Secretary or

NOAC. But actual notice is no substitute for the public

participation required by the APA.’ Attendance at

NOAC was irrelevant because NOAC was not the deci-

sionmaker. The trial record showed that no comments

by any party other than commenter NOAC were even re-

sponded to, considered by, or even presented to USDA’s

decisionmakers. Furthermore, no formal record was made

of NOAC meetings or placed before USDA’s decisonmak-

ers. This case creates a split with the D.C. Cireuit’s de-

cision in Walter A. Holm & Co. v. Hardin, 449 F.2d 1009

10a, n.5, 13a, 25a. However, the Court’s harmless error analysis en-

tirely overlooked the legal consequences of this fact, ie. that shippers

and the general public were entirely denied (until the 1990-91

season) their public participation rights with respect to these deduc-

tions. See, e.g., Mada-Luna v. Fitzpatrick, 813 F.2d 1006, 1013-14,

1016 (9th Cir. 1987); McLouth Steel, 888 F.2d at 1320, Pickus v.

U.S. Bd. of Parole, 507 F.2d 1107, 1112-13 (D.C. Cir. 1974).

'¥ See, e.g., Motor Vehicle Mfgrs. Assn. v. State Farm Mutual

Automobile Insurance Co., 463 U.S. 29, 46-57 (1983): Citizens to

Preserve Overton Park v. Volpe, 401 U.S. 402 (1971); Independent

US Tanker Owners Committee v. Dole, 809 F.2d 847 (D.C. Cir.

1987), cert. den., 108 S. Ct. 76 (1987).

““USDA can’t subvert the APA by substituting NOAC meetings

for the public participation required by the APA. See, e.g., Vermont

Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519 (1978).

(D.C. 1971), which required comments to and considera-

tion and decision by the Secretary, not the industry’s ad-

ministrative committee.

Opposing and dissenting views were common at NOAC

meetings, and many alternatives were frequently offered.

Neither the Court nor USDA cited even a single Federal

alternatives were discussed by USDA. Indeed, there was

never an instance where anything except the NOAC rec-

ommendation was even mentioned. Most importantly

there was never any consideration in any of the quota

regulations of the alternative “no quotas.”

The second factor apparently relied upon by the Court

is the longevity of USDA’s illegal practices, i.e., “[tihis

system of regulation existed for decades without chal-

lenge.” App. 18a. The proposition that the legality of

USDA’s quota regulations can somehow be saved by the

longevity of USDA’s illegal actions is simply preposterous.

If this were so, Rosa Parks would still be riding in the

back of the bus. Oliver Brown’s grandchildren would be

attending segregated schools. Jeffrey Dalmer could ex-

pect a lighter sentence because he killed so frequently.

The purpose of the APA’s public participation require-

ment is to ensure that views at variance from the agen-

cy’s proposal are placed before the agency, meaningfully

considered by the agency, and available to reviewing

courts as a measure by which they may test the correct-

ness of the agency’s decision. Absent compliance with

procedural safeguards, it is no wonder that there have

been few substantive challenges. USDA employed a

scheme intended to frustrate participation and dissent

by the 30 companies that were not NOAC members, and

by the public at large, giving total deference to com-

menter NOAC. .

Another purpose is to ensure that the agency discloses

the data it relies upon, the assumption and expertise im-

plicit in its regulatory choices, and the expected results

of its regulations. Had USDA disclosed the economic im-

pact of the quota regulations (e.g., reduced per capita

consumption, increased misallocation of resources, in-

creased competition from unregulated oranges, increased

diversion of fresh-quality oranges to unprofitable byprod-

ucts, and reduced grower revenue), the comment record

would have contained opposition and dissent (as it does

for the 1990-91 and 1991-92 seasons) that would now be

available to this Court. It wasn’t until the late 1970’s

when the quota program finally became so intolerable

(e.g., phasing out shipment quotas on many of Petition-

ers’ competitors) that Petitioners had to demand either

its justification or termination. As a threshold matter,

Petitioners had to first demand the Secretary’s compliance

with procedural safeguards so that he would have to con-

sider the economic harm done by the quotas and respond

to alternatives and criticism.

Finally, challenges to marketing order regulations must

overcome an unusual roadblock. Challengers must ex-

haust administrative remedies through USDA’s “kanga-

roo court.” 7 U.S.C. § 608¢(15) (A). USDA is the only

agency where challenges to its legislative rulemaking de-

cisions must be “laundered” by the agency itself. This

process is almost endless (this case was filed on October

29, 1980).°! This “laundering” procedure is a practical

*1 The Court’s opinion is cloaked with a troubling inference that

a generous harmless error standard to USDA was applied because

alleged cheaters shouldn’t be let off the hook on mere technicalities

because they have clever counsel. “If we invalidate past volume

restrictions, plaintiffs would obviously succeed in the pending for-

feiture proceedings brought against them by the Secretary ..

[I]t was only after some handlers ran into trouble with the Depart-

ment of Agriculture that, in looking for an escape, they came up

with this challenge.” App. lla, 18a. The petition was filed on

October 29, 1980. USDA sued Sequoia for allegedly violating the

quotas in November, 1983. Belridge, Sunny Cove, and Riverbend

have never been accused of violating quotas during the 1975-85

period. The lawfulness of USDA’s actions is at issue, not whether

handlers violated any regulations. The public participation and rea-

soned decisionmaking requirements are the core of the APA.

JSDA’s flagrant non-compliance can hardly be characterized as

“technical.” Finally, injured parties may challenge rules either at

deterrent because highly perishable crops are at stake.

It is so expensive, and results in nothing but a massive

amount of USDA post hoe rationalization.**

The Court appeared to believe that attendance at NOAC

meetings was an acceptable substitute for public partici-

pation under the APA.** NOAC’s power is limited to

making a recommendation, but APA comments must be

received and considered by the decisionmaker Even if

the post-promulgation pre-enforcement stage, or they may violtae

the rule and raise the affirmative defense of its invalidity in an

enforcement proceeding. 5 U.S.C. § 703 (“Except to the extent that

prior, adequate, and exclusive opportunity for judicial review is

provided by law, agency action is subject to judicial review in civil

or criminal proceedings for judicial enforcement.”) See, e.g., U.S.

v. Nova Scotia Food Products Corp., 568 F.2d 240, 251-52 (2d.

Cir. 1977) (in enforcement action FDA rule prescribing time-

temperature-salinity requirements for processing of smoked white-

fish held procedurally invalid for failure to disclose scientific data

that formed basis for rule and substantively invalid for “obscure[ |”

basis and purpose statement).

22 The procedural and substantive validity of the quotas can only

be upheld, if at all, on the basis of the record before USDA at the

time of each quota decision; post hoc rationalizations must be dis-

regarded. See, e.g., Motor Vehicle Mfgrs. Assn. v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 50 (1983); American Textile Mfgrs.

Inst. v. Donovan, 452 U.S. 490, 539 (1981).

*3 “Most significant is the fact that the Secretary gives interested

parties an opportunity to appear and have their say at the weekly

NOAC meetings, and that such input is received and considered by

the NOAC in making its recommendation to the Secretary. ... We

have no difficulty with the Secretary’s decision to rely on the NOAC

to filter and digest public comments and to make a recommendation.”

App. 7a, 14a. Even though a handful of growers and handlers occa-

sionally attended NOAC meetings, the “‘public’’ was not invited and

obviously did not participate in USDA’s decisionmaking process in

any way. NOAC didn’t “filter” comments for USDA’s benefit. App.

14a. It excluded all views except its own recommendation as evi-

denced by the absence of any discussion of criticism or alternatives

in USDA’s final rules.

NOAC could be trusted ™ to faithfully forward dissenting

and opposing views,” and alternatives to Washington,

“4 Commenting to NOAC is like the chickens asking the fox to

dine elsewhere. NOAC is a government-sponsored cartel committed

to a collectivist system of administered supplies and prices. Suppose

Judge Kozinski appeared at NOAC with the following statement:

“The problem lay not with the implementation of collectivism, but

with its central premise. Quite simply, [NOAC] cannot take on the

job of making all, or even a substantial number, of the important

decisions [for the orange industry]... . People’s talents, needs,

aspirations, goals and limitations are too diverse and conflicting for

any central authority to take account of... . Concentrating power

in one central authority carries with it more palpable dangers as

well. ... [T]he state [or NOAC] cannot repeal the laws of eco-

nomics; there is no fixed demand for [oranges], and no fixed supply

of people willing and able to engage in particular occupations. The

only satisfactory way of matching up supply and demand for

[oranges] is through a pricing mechanism that allows individuals

to take account of opportunity costs when making decisions. Finally,

there is a greater danger in placing too much power in the hands of

a few individuals [on NOAC]. Honesty and good will can only go

so far in preventing abuses of power. The sad experience of the

collectivist economies proves what should have been obvious all

along; unless a society [or the orange industry] has competing

sources of power, those in control will take advantage of their au-

thority to promote themselves and their friends at the expense of

everyone else.” Kozinski, “The Dark Lessons of Utopia,” 58 U. Chi.

L. Rev. 575, 585 (1991). Such a comment, like those of Mr. Pescoso-

lido and others who chose to disagree with NOAC’s party line,

surely would have fallen on NOAC’s deaf ears. This is precisely

why the legal obligation fell to (and was ignored by) USDA, the

decisionmaker, to conduct and respond to the public participation,

giving reasoned consideration to the recommendations of NOAC,

the criticisms of Judge Kozinski, and the comments and alternatives,

of others.

*5 See, e.g., NOAC 10/4/83 Minutes (Trial Ex. 776) (Mr. Pesco-

solido’s questions regarding annual marketing policy forwarded to

USDA for its consideration, but never answered: NOAC 10/27/83

Minutes (Trial Ex. 776 (““Mr. Pescosolido stated that he had spent

a great deal of his own time and also had help from paid consultants

in formulating the questions he had earlier presented. He then

questioned as to whether his questions would be answered. Chair-

man Canham replied that the extent of the questions and the request

that they be considered at this meeting appeared as though intended

to prevent adoption of the Marketing Policy. Because of this,

response to the questions would not be given at that time.”).

there remains the fatal flaw that not a single quota regu-

lation discusses the “comments” received at NOAC meet-

ings, responds to comments, or considers alternatives to

the NOAC recommendation.

3. The Ninth Circuit’s construction of the “prejudicial

error” rule requiring challengers to prove prejudice be-

yond the mere denial of procedural rights is contrary to

Congressional intent. The House Judiciary Committee ex-

plained:

The requirement that account shall be taken “of the

rule of prejudicial error” means that a procedural

omission which has been cured prior to finality of

the action involved by affording the party the proce-

dure to which he was originally entitled is not a

reversible error.

H.R. Rep. No. 1080, 79th Cong., 2d Sess. 46 (1946)

(“House Report”), reprinted in, Administrative Law

(Pike & Fisher) 3d, Desk Book at 3-104 (“Desk Book’’) :

S. Rep. No. 752, 79th Cong., Ist Sess. 28 (1945) (“Sen-

ate Report”), reprinted in, Desk Book at 3-36 (same).

The focus is on agency action, i.e. whether it complied

with procedural minima. There is absolutely no indica-

tion that challengers had to prove actual harm other than

that a procedural right due them was ignored. The Ninth

Circuit correctly found that the Secretary failed to fol-

low a required procedure, and indeed, ordered such com-

pliance in the future. App. 16a. It must follow, there-

fore, that the conceded “procedural omission” was not

“cured prior to the finality” of the quotas. According to

Congress, therefore, the Ninth Circuit should have held

that the Secretary’s “omission” was “reversible error.”

Regarding the judicial duty, Congress found:

It will be the duty of reviewing courts to prevent

avoidance of the requirements of the bill by any

means or form of indirection, ....

House Report at 44, Desk Book at 3-102: Senate Report

at 31, Desk Book at 3-39. The original construction of

the APA by the Attorney General also demonstrates that

denial of a guaranteed right is presumptively prejudicial :

The last phrase in section 10(e) sums up in succinct

fashion the “harmless error” rule applied by the

courts in the review of lower court decisions as well

as of administrative bodies, namely, that errors

which have no substantial bearing on the ultimate

rights of the parties will be disregarded.

Attorney General’s Manual on the Administrative Pro-

cedure Act 110 (1947), reprinted in, Administrative

Conference of the United States, Federal Administrative

Procedure Sourcebook 51, 159 (1985).2° USDA’s “error”

was to improperly claim the “good cause” exception to

public participation, a “right”? provided by Congress to

Petitioners. This Court should grant review to ensure

that the Congressional admonition that courts “prevent

avoidance of the requirements of the [APA] by any

means or form of indirection” is faithfully followed.

4. Review should be granted to resolve the split in the

Circuits created by this decision. Three other circuits

that have specifically considered the applicability of the

“prejudicial error” rule to instances such as the present

case where the agency completely failed to engage in

public participation have found the error presumptively

prejudicial. See, e.g., McLouth Steel Products Corp. v.

Thomas, 838 F.2d 1317, 1323 (D.C. Cir. 1988); Small

Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d

506, 547-550 (excessive difference between proposed and

final rules found presumptively harmful because there

*6 The exemplar case cited by the Attorney General helps illustrate

the inapplicability to the “harmless error” rule to situations like

the present case where there was no public participation. In Market

Street Ry. v. Cal. Railroad Commission, 324 U.S. 548, 561-62 (1945),

this Court upheld a rate order which was based in part on extra-

record evidence, company reports submitted after the hearing. Since

the decision was subject to “substantial evidence” review the Court

correctly rejected the challenge because the hearing record, even

without the new reports, would have independently supported the

rate order. The exclusion from consideration of cumulative evidence

could not have changed the result, but the Ninth Circuit could not

possibly conclude that the Secretary’s decision to impose quotas

would have been the same had he engaged in the required public

participation.

EEL

were no comments, no analysis of comments by EPA, and

no reasoned decisionmaking with respect to the particular

issue of past ownership restrictions) ; Sharon Steel Corp.

v. EPA, 597 F.2d 377, 381 (3d Cir. 1979); U.S. Steel

Corp. v. EPA, 595 F.2d 207, 215-16 (5th Cir. 1979)

(“Were we to allow EPA to prevail on this point [that

post-promulgation comments were an acceptable substi-

tute for prior notice and comment opportunity] we would

make the provisions of $ 553 virtually unenforceable. An

agency that wished to dispense with pre-promulgation

notice and comment could simply do so, invite post prom-

ulgation comment, and republish the regulation before a

reviewing court could act.... Nor can the Agency rest

on the doctrine of harmless error. ... Here, the Aqency’s

error plainly affected the procedure used, and we cannot

assume that there was no prejudice to petitioners. Ab-

sence of such prejudice must be clear for harmless error

to be applicable.) (emphasis added), rehearing and clar-

ification denied, 598 F.2d 915 (emphasizing that invali-

dated rules cannot be applied by EPA). Most courts fac-

ing the problem of agency noncompliance with one or

more of APA’s procedural safeguards have simply in-

validated the rules without pause to even consider the

possibility that such errors might not be prejudicial.**

27 See, e.g., San Diego Air Sports Center v. FAA, 887 F.2d 966

(9th Cir. 1990) ; Southern California Aerial Advertisers’ Association

v. FAA, 881 F.2d 672 (9th Cir. 1989); United States v. Picciotto,

875 F.2d 345 (D.C. Cir. 1989); State of Alaska v. U.S. Dept. of

Transportation, 868 F.2d 441 (D.C. Cir. 1989); Georgetown Uni-

versity Hospital v. Bowen, 821 F.2d 750 (D.C. Cir. 1987) ; affirmed,

488 U.S. 204, 109 S. Ct. 468 (1988); W.C. v. Bowen, 807 F.2d 1502

(9th Cir. 1987), rehearing denied and opinion amended, 819 F.2d

237; Lionz. v. Heckler, 800 F.2d 871 (9th Cir. 1986); United States

v. Reinis, 794 F.2d 506 (9th Cir. 1986); Chocolate Mfgrs. Assn. of

US v. Block, 755 F.2d 1098 (D.C. Cir. 1985); Levesque v. Block,

723 F.2d 175, 184 (1st Cir. 1983); Action on Smoking and Health

v. CAB, 713 F.2d 795 (D.C. Cir. 1983), subsequent appeal, 724 F.2d

211 (D.C. Cir. 1984); New Jersey v. EPA, 626 F.2d 1038, 1045

(D.C. Cir. 1980); Weyerhauser v. Costle, 590 F.2d 1011, 1028-29

(D.C. Cir. 1978); Anderson v. Butz, 550 F.2d 459, 463 (9th Cir.

1977) ; Arlington Oil Mills v. Knebel, 543 F.2d 1092 (5th Cir. 1976) ;

Rodway v. USDA, 514 F.2d 809 (D.C. Cir. 1975); Walter A. Holm

In Shell Oil Co. v. EPA, 950 F.2d 741 (D.C. Cir. 1991),

the Court invalidated broad definitions of hazardous waste

that exceeded the scope of the notice. The Court rejected

EPA’s argument that comments provided sufficient ac-

tual notice:

Even if the ... rules had been widely anticipated,

comments by members of the public would not in

themselves constitute adequate notice. Under the

standards of the APA, “notice necessarily must come

if at all—-frcm the Agency.”

Id. at 751, quoting, Small Refiner Lead Phase-Down Task

Force, 705 F.2d at 549. The Court flatly rejected EPA’s

argument that there was no prejudice because it had con-

sidered and repected all arguments raised by challengers:

While petitioners must show that they would have

submitted new arguments to invalidate rules in the

ease of certain procedural defects, such as an

agency’s failure to provide access to supplemental

studies, petitioners have no such duty when an agency

has entirely failed to comply with notice-and-

comment requirements.

Id. at 752 (citations omitted; emphasis added). EPA also

failed to give adequate notice of a groundwater monitor-

ing requirement. Regarding prejudicial error, EPA ar-

gued that it nevertheless carefully evaluated each im-

pediment to the leachate monitoring requirement, that

none presented were insurmountable, and that post-

promulgation comments did not identify any technical

problems manifestly different from those already con-

sidered and rejected by EPA. Again, the Court rejected

any suggestion that prejudice be shown:

As we noted in our discussion of the mixture and de-

rived from rules, however, the Agency has completely

v. Hardin, 449 F.2d 1009 (D.C. Cir. 1971); P.A.M. News Corps v.

Hardin, 440 F.2d 255 (D.C. Cir. 1971): Texdco v. FPC, 412 F.2d

740 (3d Cir. 1969) ; State of South Carolina ex rel. Patrick v. Block,

558 F. Supp. 1004 (D.S.C. 1983), rev’d on other grounds, 717 F.2d

874 (4th Cir. 1983), cert. den., 465 U.S. 1080 (1984); Rivera v.

Patino, 524 F. Supp. 136 (N.D. Cal. 1981).

failed to comply with the APA’s notice-and-comment

requirements and thus cannot demand that |potential

commenter| show pre judice. Furthermore, the [com-

menter}] has already submitted numerous comments,

including comments that relate specifically to leachate

monitoring at land treatment facilities. to which it

has received no response. Because the EPA has

failed to demonstrate that it received any relevant

pre-promulgation comments, its claim that it can

learn nothing new on remand is unacceptable.

Id, at 761 (emphasis added).

5. Although not as dangerous as the Ninth Circuit’s

expansion of the “prejudicial error’ rule into an escape

clause for agency noncompliance with APA procedures,

there is one other important issue that justifies considera-

tion by this Court. Both the Ninth Circuit and the Dis-

trict Court completely failed to perform the substantive

component of judicial review, 5 U.S.C. § 706(2) (A), to

determine whether the Secretary’s decisions to impose

quotas were the product of “reasoned decisionmaking.”

App. 2a, 16a, 33a (challenge to procedure, not substance).

See, e.g., Motor Vehicle Mfqrs. Assn. v. State Farm

Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (agency chang-

ing course has obligation to provide reasoned analysis

beyond that required for original action; agency must

examine relevant data and factors and articulate a

sufficient basis for its action: agency must cogently ex-

plain why it has exercised its discretion in given man-

ner); Bowman Transportation, Inc. v. Arkansas-Best

Freight. Systems, 419 U.S. 281, 285 (1974); Citizens to

Preserve Overton Park v. Volpe, 401 U.S. 402, 414-16

(1974): Burlington Truck Lines v. United States, 371

U.S. 156, 168 (1962). Both courts have so far departed

from their judicial review responsibilities that this Court

should exercise its supervisory power and summarily re-

verse this case and remand it for further proceedings.

Part II of the Court’s opinion concludes thta the quotas

were the product of “reasoned decisionmaking,’ but the

Court examined only the procedures of decisionmaking

and not its substance. This conclusion is based on the

reasonableness of relying on NOAC to collect data and

make recommendations and on the de jure independence

of the Secretary’s decision from NOAC. App. 13a-14a.

While de facto independence of the decisionmaker is a

factor in substantive review of regulations, it is only

one of many factors, the rest of which were all over-

looked by the Court. The record doesn’t even support

the de facto independence of USDA from NOAC,** be-

cause of USDA’s refusal to “receive’ comments from

any other source besides NOAC. There is no evidence to

show that a single quota regulation recommended by

NOAC was not approved by USDA.** This may mean

nothing more than that NOAC recommendations were

always reasonable. But, in consideration with all factors,

this Court cannot find that USDA exercised the requisite

independence. The most glaring failure of the quota de-

cisions to substantively demonstrate reasoned decisionmak-

ing was that quotas were phased out in all other re-

gions of Californin and Arizona except the San Joaquin

Valley, Petitioners’ district. Yet there is not one word of

explanation or justification in the regulations, a typical

“8 See, e.g., Ciiy of Brookings Mut. Tel. Co. v. FCC, 822 F.2d

1153, 1165 (D.C. Cir. 1987); American Horse Protection Assn. v.

Lyng, 812 F.2d 1 (D.C. Cir. 1987), review after re mand, 681 F.

Supp. 949 (D.D.C. 1988): Holm v. Hardin, 449 F.2d 1009 (D.C. Cir.

1971) ; National Farmers Org. v. Lyng, 695 F. Supp. 1207 (D.D.C.

1988).

“" Once USDA started soliciting comments, however, NOAC rec-

ommendations for quotas were turned down by USDA during the

spring of 1985 and 1992. Tr. Ex. 775, 1985 NOAC minutes, 1/22,

1/29, 2/26, 3/5, and 3/12. NOAC recommendations were increased

by USDA four weeks during the 1991-92 season. The Cost of Living

Council ordered USDA to increase NOAC-recommended quotas for

ten weeks during the spring of 1974. The first NOAC 1981-82

quota recommendation was not approved because USDA had not yet

approved the annual marketing policv. Tr. Ex. 778, 1981 NOAC

Minutes, 12/8/81 (reference to week ending 11/12/81). In one in-

stance, NOAC wanted to continue quotas bayond the end of the

quota period approved at the beginning of the season by USDA.

Tr. 1817-18.

example of which can be found at App. 50a-52a, as to why

quotas were imposed on District 1 only, and why these

shippers were not afforded the same deregulatory relief

granted their competitors in other districts, who were

allowed “unlimited” shipments. This alternative ground

for invalidation of the quotas (ALJ Dee. (Ninth Circuit

Ex. Rec., Tab 1) at 74-77) was also not addressed by the

District Court. App. 32a-33a.

Furthermore, there was never consideration or discus-

sion of any alternatives, especially the option of not using

quotas. There was never any response to Sequoia’s letters

criticizing the quotas. The trial record contains the un-

rebutted testimony that the manv dissenting views ex-

pressed at NOAC meetings were never “upstreamed”’

(Tr. 1633) to decisionmakers. Both the Federal Register

notices and testimony showed that there were no deci-

sional criteria by which USDA could evaluate NOAC’s

recommendations. The senior USDA officials responsible

for this program testified (Tr. 1818-19) that the NOAC

recommendations were routinely “rubber stamped,” that

the quota decisions were not made (Tr. 1881-82, 1888)

with sufficient “deliberate thought,” that they did not

have enough information (Tr. 1750-51, 1765, 1799,

1842, 1846, 1873-78) from which to conclude that the

quotas effectuated the purposes of the AMAA, and that

he transferred personnel (Tr. 1873, 1877-78) in an at-

tempt to obtain required data and analysis.

Decisionmaker independence is but the beginning of the

judicial inquiry into the substantive validity of the

quotas. The regulations (typical examples appearing at

49 Fed. Reg. 48265 (Dec. 12, 1984) and 50 Fed. Reg. 5

(Jan. 2, 1985), App. 50a-52a) must also be examined

against established judicial and statutory standards to

determine whether they are otherwise arbitrary, capri-

cious, or an abuse of discretion. Even a cursory exami-

nation of the quota regulations reveals almost every cate-

gory of arbitrariness, caprice, and abused discretion.

There was no discussion of alternatives, especially the

most obvious alternative of not using quotas. There was

no explanation why some districts were given “unlimited”

quotas while others were given quotas far below their

actual requests. There was no nexus between the facts

found and the decision to impose quotas, and no analysis

of the factors set forth in 7 C.F.R. §§ 907.50(a), .51(a),

especially the impact of competing unregulated citrus.

Key regulatory terms were not defined, including “or-

derly marketing,” and “reasonable” versus “unreasonable

fluctuations in supplies and prices.” Critical data was

not disclosed, such as the economic model on which the

quotas were allegedly based, the “market situation” cur-

rently confronting the industry, and “other available in-

formation.” The quotas did not show compliance with the

January, 1982 and May, 1983 Guidelines (Tr. Ex. 42,

Tr. 1398-1401). The published decisions ignored key

studies in USDA’s own files *® which contained adverse

4° See, e.g., Nelson & Robinson, “Retail and Wholesale Demand

and Marketing Order Policy for Fresh Navel Oranges,” 60 American

Journal of Agricultural Economics, 502-09 (August, 1978) (study

of increased quotas ordered during spring of 1974 showed that

demand for naval organges was elastic, i.e. that industry revenue

would increase as quotas were relaxed, contrary to claims of

NOAC); Thor & Jesse [Tech. Bull. 1664, Tr. Exs. 39 & 40], Eco-

nomie Effects of Terminating Federal Marketing Orders for Cali-

fornia-Arizona Oranges (1981) (econometric model showed that

long-term effects of terminating use of prorate are more fresh sales,

reduced byproducts diversions, increased grower revenue, no in-

crased price or shipment variability, and reduced byproducts process-

ing capacity); AMS (Study Team) [Agric. Econ. Rpt. No. 477],

A Review of Federal Marketing Orders for Fruits, Vegetables, and

Specialty Crops—Economic Efficiency and Welfare Implications

(1981) (excessively restrictive navel quotas has caused chronic over-

production and resource misallocation; efficiency losses from mis-

allocation are likely to exceed any stabilization benefits); Jesse &

Johnson [Agric. Econ. Rpt. No. 471, Tr. Ex. 41]; Effectiveness of

Federal Marketing Orders for Fruits and Vegetables (1981) (no

evidence that order commodity prices were higher, either in absolute

terms or as a percent of partity, or more stable than comparable non-

order commodities) ; Office of Management and Budget, Agricultural

Marketing Orders (1982) (prices for unregulated citrus more stable

than citrus subject to quotas); Office of Management and Budget,

“Agricultural Marketing Orders” (2/18/82) (Tr. Ex. 738); US.

Dept. of Justice (Tr. Ex. 737), Post-Hearing Brief and Exceptions

findings and ignored data in USDA’s files that tended to

show that the quotas had adverse economic impact or

that quotas weren't needed in response to some perceived

market disruption.

6. The Ninth Circuit’s decision will cause significant

short-run harm as well as its disastrous potential to inflict

long-run damage to the decisionmaking process, Even

through the Court granted prospective relief in the form

of an injunction requiring the Secretary to comply with

the public participation requirements of the APA with

respect to any future quotas, the Court’s decision leaves

Petitioners without any remedy for the past violations

of the APA. Cf. McKesson v. Div. of Alcoholic Beverages

& Tobacco, Dept. of Bus. Reg. of Florida, 496 U.S. 18

(1990). One enforcement case is currently pending

against Petitioners Sequoia and Exeter in which the

United States is seeking approximately $3.2 million in

forfeitures under 7 U.S.C. § 608a(5) for alleged quota

overshipments during the 1978-82 seasons. As the Ninth

Circuit correctly recognized, App. lla, invalidation of the

to Recommended Decision (1984) (favoring elimination of quotas

because resource misallocation, harm to growers, and lack of demon-

strated need); General Accounting Office, The Role of Federal

Marketing Orders in Establishing and Maintaining Orderly Market-

ing Conditions. [RCED 85-57] (1985) (USDA lacked objective eco-

nomie criteria by which to measure marketing order performance in

light of Congressional objectives); Agribusiness Associates, Eeo-

nomic Analysis of Volume Controls, California-Arizona Navel

Orange Marketing Order (1985) (navel quotas have reduced pro-

ducer and handler revenue) ; Powers, “Prices and Shipments During

Prorate and Prorate Suspension for the California-Arizona Navel

Orange Federal Marketing Order,” Citrus Fruits: Situation and

Outlook (Feb. 1986) (following Feb, 1, 1985 navel prorate suspen-

sion, Wholesale prices were more stable, domestic fresh shipments

increased, shipments to byproducts decreased significantly, and ship-

ment variability decreased) ; Shepard, “Cartelization of the Cali-

fornia-Arizona Orange Industry: 1934-81" 29 Journal of Law and

Economies 83-123 (1986) (navel quotas have reduced grower returns

by one-half; “The market allocation cum price discrimination pro-

gram enforced by the marketing orders thus begets long-run market

responses that are hostile to the very objectives that underlie the

marketing orders.”’).

quotas in this case would provide a successful affirmative

defense in pending enforcement cases. In addition, USDA

claims to have settled several cases, App. 58a (USDA

August 25, 1989 press release), and is demanding pay-

ments in at least 39 other cases totalling in excess of

$12 million. Finally, there are 31 cases pending against

shippers under the False Claims Act, 31 U.S.C. $ 3729,

et seq., for violations of orange and lemon quotas totalling

over $60 million in forfeitures and damages. The en-

forceability of past quotas notwithstanding USDA’s APA

violations will be an affirmative defense in all of these

cases. This count does not include an unknown number

of violation cases pending under USDA’s other marketing

orders. All of the controversial supply control programs

are located within the Ninth Circuit, so this decision will

undoubtedly impact these cases also.

CONCLUSION

The Ninth Circuit begins its opinion with the pious

observation that:

|[p|rocedure, not substance, is what most distin-

guishes our government from others. In the not-

so-distant past, a government agency in the Soviet

Union could impose controls on the production of

commodities without bothering to involve the public

in the decisionmaking process. By contrast, a gov-

ernment agency in the United States must usually

give notice to, and accept comment from, the public

before undertaking to place manacles on the invisible

hand.

App. 2a. The far more important difference is that we

adhere to the Rule of Law, under which government ac-

tion taken without required procedures must be voided

by reviewing courts. Without diligent exercise of this

obligation by the courts, our guarantees of substantive

and procedural safeguards against government abuse

would be no more useful than the former Soviet Union’s

guarantees of free speech, press, and ballot. The Ninth

Circuit correctly found that the challenged quotas were

imposed without the procedural safeguards in § 553 of

the APA. It must follow, therefore, that they do not have

the “force of law.”’ For the foregoing reasons, Petitioners

ask that this Court grant certiorari to review the errone-

ous and dangerous’ decision of the Ninth Circuit.

Respectfully submitted,

JAMES A. Moopy

Suite 600

2300 N. Street, N.W.

Washington, D.C. 20037

September 8, 1992 (202) 6638-9011

APPENDICES

APPENDIX

UNITED STATES COURT OF APPEALS

NINTH CIRCUIT

Nos. 90-15505, 90-15781

RIVERBEND FARMS, INC., a California Corporation; SUNNY

COVE CITRUS ASSOCIATION, a California cooperative

corporation; BELRIDGE PACKING Co., a California cor-

poration; SEQUOIA ORANGE COMPANY, INC., a California

corporation; and EXETER ORANGE COMPANY, ING., a

California corporation,

Plaintiffs-A ppellants,

Vv.

EDWARD R. MADIGAN, Secty Dept. of Agriculture,

Defendant-A ppellee.

Appeal from the United States District Court

for the Eastern District of California

Argued and Submitted Sept. 12, 1991

Decided March 17, 1992

James Moody, Washington, D.C., and Thomas E. Cam-

pagne, A Professional Corporation, Fresno, Cal., for

plaintiffs-appellees-appellants.

Mark W. Pennack, U.S. Dept. of Justice, Washington,

D.C., for defendant-appellant-appellee.

Before CANBY and KOZINSKI, Circuit Judges, and

CARROLL,** District Judge.

KOZINSKI, Circuit Judge.

Procedure, not substance, is what most distinguishes

our government from others. In the not-so-distant past,

a government agency in the Soviet Union could impose

controls on the production of commodities without bother-

ing to involve the public in the decisionmaking process.

By contrast, a government agency in the United States

must usually give notice to, and accept comments from,

the public before undertaking to place manacles on the

invisible hand. 5 U.S.C. § 553. In this case, we address

some of the details of this notice and comment require-

ment.

Background

Plaintiffs are domestic “handlers” of navel oranges:

they buy, sell, consign, transport, ship, or by other means

place oranges in the current of commerce. 7 C.F.R.

§ 907.10 (1991). They challenge the procedure used by

the Secretary of Agriculture to regulate the navel orange

market. Plaintiffs contend that the regulatory system:

(1) neither complies with the Administrative Procedure

Act’s notice and comment requirements nor falls within

the good cause exception to those requirements; (2) evis-

cerates the requirement that the Secretary engage in

reasoned decisionmaking; and (3) denies plaintiffs equity

in marketing opportunity.

The Agricultural Marketing Agreement Act, 7 U.S.C.

§ 601 et seg., authorizes the Secretary of Agriculture to

issue marketing orders limiting the quantity of com-

modities shipped into markets identified by the Secretary,

thus protecting prices for producers and maintaining

orderly marketing conditions. 7 U.S.C. § 602(1). Pur-

** The Honorable Ear! H. Carroll, United States District Judge,

District of Arizona, sitting by designation.

suant to the AMAA, the Secretary promulgated regula-

tions in 1954 (Marketing Order 907, 7 C.F.R. Part 907)

to govern the shipment of navel oranges from California

and Arizona.’ For the most part, the regulations promul-

gated in this marketing order still govern the navel

orange market.

The regulations divide California and Arizona into four

districts and authorize the Secretary to limit the quantity

of navel oranges shipped from these districts to points in

the continental United States or Canada during the navel

orange marketing season, which generally runs from the

middle of fall until the middle of spring.

Pursuant to the regulations, the Navel Orange Admin-

istrative Committee (NOAC), an eleven-member commit-

tee composed of ten representatives of growers, handlers

or cooperative marketing organizations and one non-

industry representative, develops its annual Marketing

Policy before the start of each season. See 7 C.F.R.

$§ 907.-20-.34; id. §§ 907.50-.51; Judicial Officer’s Opin-

ion, Finding of Fact No. 9(a), at 45-46. As part of this

process, the NOAC notifies all handlers by letter and

places advertisements in the newspaper before holding a

public meeting concerning the proposed Policy. JO, Find-

ing of Fact No. 14(d), at 70. The Policy estimates the

weekly volume restrictions that will probably be needed

during the upcoming navel orange season. JO, Finding

of Fact No. 9(a), at 46. The Secretary then analyzes the

NOAC recommendations in the Policy and issues a Posi-

tion Paper indicating whether he intends to impose volume

restrictions in the forthcoming year and what he intends

those restrictions to be for each week during the season.

JO, Finding of Fact No. 16, at 71-79.

Each Tuesday during the season, the NOAC holds a

meeting to settle on a recommendation to give the Secre-

tary for the following week’s volume restrictions. Before

! Plaintiffs do not challenge the validity of the marketing order.

each meeting, NOAC members usually notify growers and

handlers of navel oranges in order to obtain their general

views on market conditions. JO at 190. At the meeting,

growers, handlers and any other members of the public

may participate. JO, Finding of Fact No. 17, at 79.

After the meeting, the NOAC makes a recommendation to

the Secretary as to the volume of oranges he should au-

thorize for shipment into the domestic market for the

week beginning that Friday. Jd. After making its recom-

mendation, the NOAC provisionally calculates the quan-

tity of oranges that may be handled by each district, and

by each handler within the district, during the coming

week, 7 C.F.R. § 907.54(a), and informs the handlers

of their scheduled allotment. The Secretary then issues

the actual rule, which seldom varies from the NOAC’s

recommendation. JO, Finding of Fact No. 20, at 86. The

rule is published in the Federal Register on Friday and

sets the volume restrictions for the upcoming week. When

the Secretary issues the rule, he includes a finding that

states: “It is further found that it is impracticable and

contrary to the public interest to give preliminary notice,

engage in public rulemaking, and postpone the effective

date until 30 days after publication in the Federal Regis-

ter.’ ALJ Decision, Finding of Fact No. 4(c), at 206.

Discussion

A. The Administrative Procedure Act ensures that the

massive federal bureaucracy remains tethered to those

it governs—or so the theory goes. When an agency de-

cides to issue a rule, it must first publish a notice of

proposed rulemaking in the Federal Register, which is

the guide for those members of the public—usually spe-

cial interest groups—who want to participate in the rule-

making process. The notice must contain “‘(1) a state-

ment of the time, place, and nature of public rule making

proceedings; (2) reference to the legal authority under

]

which the rule is proposed; and (3) either the terms or

substance of the proposed rule or a description of the sub-

jects and issues involved.” 5 U.S.C. § 553(b). Although

the APA mandates no minimum comment period, some

window of time, usually thirty days or more, is then

allowed for interested parties to comment. Petry v. Block,

737 F.2d 1193, 1201 (D.C.Cir.1984). The public may

comment “through submission of written data, views, or

arguments with or without opportunity for oral presenta-

tion.” 5 U.S.C. § 553(c). After “consideration of the

relevant matter presented,” the agency publishes the final

rule, accompanied by a “concise general statement of [its]

basis and purpose,” in the Register. Id.

The gestation period from initial notice to final rule

can be a couple of months, and often much longer depend-

ing on the time the agency allows for comments and the

time it takes to digest those comments. In addition to

the time required for the notice and comment procedures

to run their course, an additional thirty days ordinarily

-must pass between the time the final rule is published

and the time it takes effect. 5 U.S.C. § 553(d).

B. The APA contains a few exceptions to the notice

and comment requirements for informal rulemaking. One

of these is the good cause exception, which applies when

an agency “for good cause finds... that notice and public

procedure thereon are impracticable, unnecessary, or con-

trary to the public interest.” 5 U.S.C, § 553(b) (B). The

Secretary of Agriculture has relied on this exception for

several decades and has never fully complied with the

APA’s notice and comment requirements before issuing

weekly navel orange volume restrictions.

Plaintiffs, currently defendants in forfeiture proceed-

ings for allegedly violating volume restrictions, argue that

past volume restrictions are invalid because they were

promulgated without observing the APA’s notice and

comment requirements. Plaintiffs argue that the good

cause exception cannot justify the wholesale abandonment

of the APA’s requirements week in and week out, year

in and year out, for the entire life of a regulatory pro-

gram. The Secretary counters that the regulatory process

simply could not be carried out if he were required to

follow APA procedures (which often take weeks or

months) for rules that must be put into effect almost

immediately and that have an effective life of exactly one

week. We agree with both parties.

The Secretary certainly has the better of the argument

when he points out that he has made a substantive regu-

latory decision that volume restrictions must be issued

on a weekly basis, and that we and plaintiffs are bound

by that decision. The APA was intended to impose pro-

cedural requirements on the adoption of rules; it is not

a device by which an agency may be forced to adopt a

less effective regulatory program in order to more ef-

fectively comply with notice and comment procedures. The

existence of the good cause exception is proof that Con-

gress intended to let agencies depart from normal APA

procedures where compliance would jeopardize their as-

signed missions. Levesque v. Block, 723 F.2d 175, 184

(1st Cir,1983).°

2 Under the good cause exception, notice and opportunity for com-

ment is not required when doing so would be: (1) impracticable ;

(2) unnecessary; or (3) contrary to the public interest. Notice and

comment is “impracticable” when the agency cannot “both follow

section 553 and execute its statutory duties.” Levesque, 723 F.2d at

184. Notice and comment is “unnecessary” when “the regulation

is technical or minor.” Jd. Furthermore, ‘contrary to the public

interest” supplements these terms and “requires that public rule-

making procedures shall not prevent an agency from operating.”

Id. (quoting S.Rep. No. 752, 79th Cong., Ist Sess. 14 (1945), re-

printed in Senate Judiciary Committee, 79th Cong., 2d Sess., Ad-

ministrative Procedure Act Legislative History 185, 200 (1946)).

See generally Jordan, The Administrative Procedure Act’s “Good

Cause” Exemption, 36 Admin.L.Rev. 113, 120-52 (1984); Comment,

Agency Discretion to Accept Comment in Informal Rulemaking:

At the same time, the good cause exception goes only

as far as its name implies: It authorizes departures

from the APA’s requirements only when compliance would

interfere with the agency’s ability to carry out its mis-

sion. The agency thus must minimize conflict with the

APA by complying with those APA requirements it is

capable of complying with.

The procedures the Secretary has adopted do not, in

fact, depart radically from those contemplated by the

APA. Most significant is the fact that the Secretary

gives interested parties an opportunity to appear and

have their say at the weekly NOAC meetings, and that

such input is received and considered by the NOAC in

making its recommendation to the Secretary. The proce-

dure departs from normal APA practice in only three

respects: First, the Secretary does not publish a Federal

which would advise the public that it could comment at

the NOAC meeting to be held the Tuesday before the

week in question. Second, there appears to be no oppor-

tunity for written comments—or indeed any comments

other than by persons attending the NOAC meetings.

Finally, the volume restrictions go into effect immedi-

ately, bypassing the normal 30-day delay in the effective

date of a final rule.

The last of these departures is the easiest to justify.

To analyze it, we must first recognize that the APA con-

tains two good cause exceptions: One, as we have noted,

excuses failure to abide by the notice and comment re-

quirements, and the other allows an agency to forego the

30-day waiting period between publication of the final

What Constitutes “Good Cause’ Under the Administrative Pro-

cedure Act?, 1980 B.Y.U.L.Rev. 93, 100-01.

Emergencies, though not the only situations constituting good

cause, are the most common. See Northern Arapahoe Tribe v. Hodel,

808 F.2d 741, 751 (10th Cir.1987); Buschmann v. Schweile r, 676

F.2d 352, 357 (9th Cir.1982).

rule and its effective date. See 5 U.S.C. § 553(b) (B) &

(d) (3). Althouch some courts have failed to distinguish

the two good cause exceptions, commentators and some

courts have correctly recognized that different policies

underlie the exceptions, and that they can be invoked for

different reasons, See U.S. Steel Corp. v. EPA, 605 F.2d

283. 289-90 (7th Cir.1979) (good cause more easily

found as to 30-day waiting period), cert. denied, 444 U.S.

1035. 100 S.Ct. 710, 62 L.Ed.2d 672 (1980); Comment,

1980 B.Y.U.L.Rey., at 97 (30-day waiting period “in no

way relates to the notice and comment requirement, but

the federal courts have not always been careful to main-

tain the distinction”) ; G. Edles & J. Nelson, Federal Regu-

latory Process: Agency Practices and Procedures § 4.2.1TI,

at 68 (2d ed. 1991) (two good cause exceptions are “con-

ceptually different”),

Unlike the notice and comment requirements, which

are designed to ensure publie participation in rulemaking,

the 30-day waiting period is intended to give affected

parties time to adjust their behavior before the final rule

takes effect. This is sensible; until the final rule is pub-

lished, the public is not sure of what the rule will be or

when the rule will actually be promulgated. In addition,

a window of time usualy causes no harm.

Neither of these reasons for the waiting period is ap-

plicable to the navel orange regulatory system. The pub-

lie knows the rule will take effect on Friday of the week

in question and is given accurate, advance notice of what

the rule is likely to be. See JO, Finding of Fact No. 18,

at 83.2 More importantly, requiring this 30-day waiting

period would cause great harm: It would force the Secre-

tary to predict weekly volume restrictions more than

thirty days in advance. The record convincingly estab-

3 The NOAC notifies handlers on Tuesday of its recommendation

to the Secretary, and the Secretary has accepted this recommenda-

tion without change over 90°% of the time. JO, Finding of Fact

No, 18, at 83.

lishes the impossibility of accomplishing that feat with

any degree of accuracy: The NOAC is constantly revis-

ing projections right up until, and occasionally even dur-

ing, the week in question. See JO, Finding of Fact No.

12(a), at 60; id. No. 18(a), at 67; id, No. 18, at 83.

We cannot impose a 30-day waiting period, in essence

requiring the Secretary to predict market and weather

conditions more than a month in advance, without throw-

ing the entire regulatory program out of kilter. We

therefore hold that the Secretary has shown good cause

for making the weekly restriction effective upon publica-

tion in the Federal Register.

More problematic are the Secretary’s other two devia-

tions from normal APA procedures. While the Secretary

argues persuasively that interested parties have actual

notice of the weekly meetings, such notice is defective in

two ways. First, the APA contemplates notice to all mem-

bers of the public—regardless of whether individual mem-

bers have a particularized interest in the regulatory pro-

gram—by means of publication in the Federal Register.

While Federal Register publication may be unnecessary

or duplicative in some, if not many, cases, its prophylactic

effect ensures that agencies and reviewing courts need not

make the difficult and necessarily ad hoe determinations

of who has a sufficient interest (i.e., would they comment

if given notice?) in a proposed rule. Second, any notice

given to interested parties does not contain anything

akin to a proposed rule: The Secretary gives no indica-

tion of the proposed volume restriction for that week. It

is a fundamental tenet of the APA that the public must

be given some indication of what the agency proposes to

do so that it might offer meaningful comment thereon.

5 U.S.C. § 553(b) (3); K. Davis, 1 Administrative Law

Treatise § 6.25, at 571 (2d ed. 1978).

The Secretary has not demonstrated that it would be

impracticable to publish a notice in the Federal Register

a few days before the NOAC meeting, advising the public

10a

of the time and place of the meeting, the legal authority

for the proposed volume restrictions‘ and the proposed

volume restrictions.*° The Secretary would not, of course,

be bound by a proposed volume restriction—the purpose

of notice and comment is to help the agency make an in-

formed decision—but the agency would be required to

give its best estimate based on the avaiiable information

at the time the notice is published.*

The third deviation from the APA’s normal practice

is as troubling as the second: The Secretary allows only

oral comments from those who attend the NOAC meet-

ings. There may be persons interested in the naval orange

market who are unable to attend, or have a representa-

tive attend, the weekly NOAC meeting, yet the Secre-

tary has suggested no reason why he cannot accommodate

the normal APA procedure of allowing the submission of

written comments before promulgating weekly volume

restrictions. It’s clear that given even a few days notice,

members of the public would have sufficient opportunity

to submit written comments to the NOAC before the

weekly meeting.

4This, of course, would simply require brief reference to the

AMAA and Marketing Order 907.

5 Given that the Secretary's annual position paper sets forth the

planned weekly volume restrictions, the Secretary cannot seriously

contend that it would be impracticable to include proposed figures in

the notice. If, at the time the notice is published, it’s too early to

tell what the actual figures might be, the Secretary can say so in

the notice and replicate the figures that were allotted for the week

in question in the position paper.

®There is no requirement that the rule contained in the notice

of proposed rulemaking be the same as the final rule: “Parties have

no right to insist that a rule remain frozen in its vestigial form.”

South Terminal Corp. v. EPA, 504 F.2d 646, 659 (1st Cir.1974) ;

see also AFL-CIO v. Donovan, 757 F.2d 330, 338 (D.C.Cir.1985)

(“It is. of course, elementary that a final rule need not be identical

to the original proposed rule.’’).

= ll

lla

We thus conclude that the Secretary’s rulemaking fails

to satisfy the APA’s requirements because he has not

demonstrated good cause for failing to give sufficient no-

tice in the Federal Register of the weekly NOAC meet-

ing and failing to allow the public to comment by means

other than personal participation at the NOAC meeting.

This conclusion, though important for how the Secre-

tary must regulate the naval orange markets in the fu-

ture, does not answer the question of most concern to the

parties in this case: the remedy. We must decide what

effect the Secretary’s failure to comply with notice and

comment requirements carries for past weekly volume

restrictions. If we invalidate past volume restrictions,

plaintiffs would obviously succeed in the pending forfeit-

ure proceedings brought against them by the Secretary.

It’s to that question we now turn,

C. The APA requires that we take “due account” of

the harmless error rule. See 5 U.S.C. § 706. It’s true, as

plaintiffs argue, that we must exercise great caution in

applying the harmless error rule in the administrative

rulemaking context. The reason is apparent: Harmless

error is more readily abused there than in the civil or

criminal trial context. An agency is not required to adopt

a rule that conforms in any way to the comments pre-

sented to it. So long as it explains its reasons, it may

adopt a rule that all commentators think is stupid or

unnecessary. Thus, if the harmless error rule were to

look solely to result, an agency could always claim that

it would have adopted the same rule even if it had com-

plied with the APA procedures. To avoid gutting the

APA’s procedural requirements, harmless error anaysis

in administrative rulemaking must therefore focus on the

process as well as the result. We have held that the fail-

ure to provide notice and comment is harmless only where

the agency’s mistake “clearly had no bearing on the pro-

cedure used or the substance of decision reached.” Sage-

brush Rebellion, Inc, v. Hodel, 790 F.2d 760, 764-65 (9th

Cir.1986) (quoting Braniff Airways v. CAB, 379 F.2d

12a

453, 461 (D.C.Cir.1976)); see also County of Del Norte

v. United States, 732 F.2d 1462, 1466-67 (9th Cir.1984)

(applying harmless error rule in context of administra-

tive rulemaking), cert. denied, 469 U.S. 1189, 105 S.Ct.

958, 83 L.Ed.2d 864 (1985); cf. Buckley v. Valeo, 424

U.S. 1, 142, 96 S.Ct. 612, 693, 46 L.Ed.2d 659 (1976)

(upholding past administrative actions of Federal Elec-

tion Commission though Commissioners were selected in

violation of constitutional principle of separation of

powers) .*

Sagebrush exemplifies proper application of the harm-

less error rule. There, plaintiffs challenged the Secretary

of the Interior’s failure to give notice and hold hearings

as required by the Federal Land Policy and Manage-

ment Act (FLPMA). The Secretary had, however, held

hearings pursuant to the National Environmental Policy

Act. We agreed with the plaintiffs that “the notices did

not comply in every respect with the terms of [the

FLPMA]. However, we |found| the error harmless since

the purposes of FLPMA’s notice requirement were fully

satisfied.” 790 F.2d at 764. As to opportunity for com-

ment, we similarly held that although the hearings were

not in technical compliance with the statutory require-

ments the error was harmless because the hearings never-

theless ‘“‘afforded the public a full and fair opportunity to

be heard.” Id. at 769.

Although Sagebrush dealt with the notice and com-

ment requirements of the FLPMA, we find its reasoning

7 Other circuits (including the D.C. Circuit, which handles ad-

ministrative cases with numbing regularity) have also applied the

harmless error rule to administrative rulemaking. For example, in

Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506,

549 (D.C.Cir.1983), the court held that “even if the agency has not

given notice in the statutorily prescribed fashion, actual notice will

render the error harmless.” See also Shelton v. Marsh, 902 F.2d

1201, 1206 (6th Cir.1990) (“cases specifically exploring the effect

of failure to follow notice procedures have held that the doctrine

applies where there is sufficient actual notice’).

13a

dispositive here. As we explained earlier, all parties be-

fore us knew the ground rules: that there would be an

annual position paper setting proposed weekly volume re-

strictions; that the NOAC would meet every Tuesday

during the season;* that the starting point for debate at

those Tuesday meetings would be the figure listed for

that week in the annual position paper (or in the NOAC’s

updated versions of it’) ; that there would be opportunity

for public comment at the Tuesday meetings; and that

the final volume restrictions would be issued by the Sec-

retary soon afterwards. This system of regulation existed

for decades without challenge; it was only after some

handlers ran into trouble with the Department of Agricul-

ture that, in looking for an escape, they came up with

this challenge. While they are right that the Secretary

must comply with some of the APA’s technical require-

ments, ther belated challenge is evidence of the lack of

prejudice resulting from the Secretary’s failure to do so

in the past thirty-five days.

If the procedural error here is not harmless, it’s hard

to imagine a case where it would be. While some may

argue that would be all for the good, we cannot and will

not presume that Congress intended the APA’s harmless

error rule to be a nullity. The Secretary’s failure to com-

ply with the specific dictates of the APA’s notice and com-

ment requirements is harmless, and we therefore will not

invalidate the volume restrictions issued in the past by

the Secretary.

Some courts have held that agency action is arbitrary

and capricious if “the agency has not really taken a ‘hard

look’ at the salient problems and has not genuinely en-

* Plaintiffs do not claim they were unaware of the Tuesday

meetings. _

®* The NOAC has occasionally issued a revised schedule of esti-

mated weekly restrictions to supplement or replace the original

schedule. JO at 163.

l4a

gaged in reasoned decision-making.” Greater Boston Tele-

vision Corp. v. FCC, 444 F.2d 841, 851 (D.C.Cir.1970)

(footnote omitted), cert. denied, 403 U.S. 923, 91 S.Ct.

2233, 29 L.Ed.2d 701 (1971). Plaintiffs argue that all:

volume regulations for the years in question must be set

aside because the Secretary did not engage in reasoned

decision-making.

Plaintiffs base their argument on the fact that the

Secretary regularly relied on the NOAC to collect data

from the growers and make recommendations for the

weekly volume restrictions. The parties agree that the

Secretary normally adopts NOAC’s recommendation, al-

though he does not always do so. See JO, Finding of

Fact No. 20, at 86-87.

We have no difficulty with the Secretary’s decision to

rely on the NOAC to filter and digest public comments

and to make a recommendation. Subject to the require-

ments of the APA, the Federal Advisory Committee Act,

5 U.S.C.App. 2, and other procedural requirements, the

Secretary is free to seek advice from whatever sources he

deems appropriate, so long as he or his delegate in the

Department retains ultimate authority to issue the regu-

lation. See Sunshine Anthracite Coal Co. v. Adkins, 310

U.S. 381, 399, 60 S.Ct. 907, 915, 84 L.Ed. 1263 (1940).

Here, the record makes it clear that the Secretary does

not rubber stamp the NOAC’s recommendations. AlI-

though the Secretary normally follows the NOAC’s sug-

gestions, he retains the authority to depart from or ignore

them altogether.

Ill

Plaintiffs argue that the Secretary’s exemption of naval

oranges shipped to markets outside the continental

United States and Canada from the volume restrictions

violates the statute’s “uniform rule” requirement. 7

| U.S.C. § 608¢(6) (C). The easy answer to this contention

! is that the statute gives the Secretary discretion to do

a TE

15a

precisely what he does: He may designate certain mar-

kets to which handlers may ship limited quantities of

naval oranges (they’re the continental United States and

Canada under the current regulations, see 7 C.F.R.

$ 907.18; id. § 907.67) and exempt other markets, thereby

leaving them open for handlers to ship unlimited quan-

tities. See 7 U.S.C. § 608¢(6)(C) (allowing Secretary

to restrict shipments to “any or all markets”). Shipments

to markets other than the designated ones are simply ir-

relevant in determining whether the rule is uniform.

Plaintiffs also argue that the fact that weekly volume

restrictions, calculated as percentages of each district’s

total crop, occasionally vary among districts is a violation

of the uniform rule requirement. But the statute does

not require that the Secretary limit every district every

week to the same percentage of its crop as other districts.

Rather, the Secretary has discretion to adjust allocations

among districts during the course of the season; for pur-

poses of the statute, the relevant time period is the season

as a whole, not the weeks within it. See id.

It’s true that during some weeks, and indeed some sea-

sons, certain districts have been completely unrestricted.

But those districts were obviously not going to, and did

not, meet their full seasonal allotment to the continental

United States and Canada. As the Judicial Officer con-

cluded, “volume regulation may not be imposed in a dis-

trict if it is obvious that the handlers in the district will

not be able to use all of the allotments that otherwise

would have been given to them.” JO Finding of Fact No.

22, at 90. With a couple of de minimis exceptions, during

no season has the Secretary allocated to any district a

percentage of its total available crop greater than to any

other district.

Conclusion

As governments elsewhere loosen their grip over com-

mercial markets, the Secretary of Agriculture forges

ahead with a government-mandated system of quantity

l6a

restrictions adopted nearly four decades ago. Whatever

the merits of that policy, our concern is procedure, not

substance. Though we disapprove of the Secretary’s con-

tinued reliance on the good cause exception to abandon

APA procedures altogether, his failure to do so in the

past cannot serve to invalidate old volume restrictions.

On remand, the district court shall give the Secretary

an appropriate period to comply with this opinion—at the

latest by the time the Secretary begins imposing weekly

volume restrictions for the 1992-93 navel orange season.

To summarize, the Secretary must:

(1) publish an advance notice of the Tuesday NOAC

meetings in the Federal Register, preferably at least a

week ahead of time, which should include the time and

place of the NOAC meeting, the legal authority for the

proposed restriction and a tentative projection of the

volume restriction for the week to follow the meeting; and

(2) allow parties to submit written comments to the

NOAC and the Secretary in lieu of or in addition to per-

mitting oral participation at the NOAC meeting.

AFFIRMED IN PART; REVERSED IN PART; RE-

MANDED FOR FURTHER PROCEEDINGS CONSIST-

ENT WITH THIS OPINION.

17a

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 90-15505

D.C. No. CV-88-0098-EDP

RIVERBEND Farms, INC., a_ California Corporation;

SEQUOIA ORANGE Co.; EXETER ORANGE Co., a California

Corporation,

Plaintiffs-A ppellees,

EDWARD R. MADIGAN, Secretary

Department of Agriculture,

Defendant-A ppellant.

No. 90-15781

D.C. No. CV-88-0098-EDP

RIVERBEND FarMS, INC., a California Corporation;

SUNNY CovE CITRUS ASSOCIATION, a California coop-

erative corporation; BELRIDGE PACKING Co., a Califor-

nia corporation; SEQUOIA ORANGE COMPANY, INC., a

California corporation; and EXETER ORANGE ComPANy,

INC., a California corporation,

Plaintiffs-A ppellants,

EDWARD R. MADIGAN, Secty

Dept. of Agriculture,

Defendant-A ppellee.

18a

ORDER

[Filed Jun 9, 1992]

Before: CANBY and KOZINSKI, Circuit Judges, and

CARROLL,”* District Judge.

The petition for rehearing is denied. The full court has

been advised of the suggestion for en banc rehearing and

no judge has requested a vote thereon. The suggestion

for rehearing en banc is therefore rejected.

* The Honorable Earl H. Carroll, United States District Judge,

District of Arizona, sitting by designation.

ene

19a

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

No. CV F-88-98 EDP

RIVERBEND FarMs, INC., a California corporation,

SUNNY COVE CITRUS ASSOCIATION, a California coop-

erative corp., BELRIDGE PACKING Co., a California

corp.; SEQUOIA ORANGE CoMPANY, INC., a California

corp.; and EXETER ORANGE COMPANY INC., a California

corp. ;

Plaintiffs,

CLAYTON K. YEUTTER,* Secretary of Agriculture

of the United States,

Defendant.

MEMORANDUM DECISION RE: DEFENDANT'S

MOTION FOR RECONSIDERATION

[Filed Mar. 22, 1990]

The Court entered its Memorandum Decision Re:

Cross Motions for Summary Judgment. At the hearing

on the defendant’s motion for reconsideration, the Court

requested the defendant to submit sworn statements ex-

plaining when, how and by whom the information upon

which the weekly volume regulations under Marketing

Order 907 is gathered, and when it becomes first avail-

able.

"Clayton K. Yeutter succeeded Richard Lyng as Secretary of

r re on February 16, 1989, and should be substituted as

lant in this suit. No further action is necessary to continue

reason of the last sentence of 42 U.S.C. $ 405(¢), and

v.P. 25(d).

20a

In reading the materials submitted by the government

and reviewing the minutes of the respective Orange Com-

mittees on a random basis, the Court is not satisfied that

the government has actually answered the Court’s inquiry.

The government adequately explains the mechanics by

which the Committee seeks to gather the information

necessary to issue ther weekly volume regulations. For

instance, in item five (5) of Mr. Peightel’s declaration:

Item 5—Crop Condition Information.

HOW OBTAINED: Visual observations, report from

packinghouses and reports from wholesale and retail

trade.

ORIGIN OF INFORMATION: Field staff, grower

members of the committee, handlers, and sales per-

sonnel.

WHO RECEIVES INFORMATION: Committee

members, Secretary (USDA) and Committee man-

agement and staff.

WHEN INFORMATION IS AVAILABLE: Com-

mitee members. Handler members receive reports

daily on fruit condition (holding quality, flavor and

apearance) from their packers, and from their

sources associated with the wholesale and retail

trade. Grower members assess the condition of their

crops continuously throughout the year.

Secretary (USDA). On Tuesday morning of each

week— (regularly scheduled meeting time).

Committee management & Staff. On a daily basis

from field staff, and from conversations with han-

dlers.

| Mr. Peightal’s declaration is simply a recital of what

the present system is. There is no explanation in either

| Mr. Peightal’s declaration or in the presentation of the

attorneys for the government as to why this information,

2la

when received, could not be gathered or correlated on an

earlier date.

Most fresh fruit is shipped and packed rather promptly

without any appreciable holdover at the packing source.

Oranges, on the other hand, are held for varying lengths

of time until the color of the orange improves to the point

that the produce can be entered into commerce.

The minutes of the Committee meeting merely reflect

the procedure presently being used. They do not contain

any information from which the Court can deduce that an

emergency existed that justified the disregard of the law.

Accordingly, it is the order of the Court that the mat-

ter is remanded to the Secretary of Agriculture to enter

an order requiring the Orange Administrative Committee

to comply with the provisions of 5 U.S.C. § 553(b) or,

alternately, when the Orange Committee determines that

compliance with that section may be waived in accordance

with law, to make findings of fact that justify a waiver

of such requirement as provided in 5 U.S.C. § 553(B)

(3) (b).

DATED: March 22, 1990

/s/ Edward Dean Price

EDWARD DEAN PRICE

United States District Judge

22a

UNITED STATES DISTICT COURT

EASTERN DISTRICT OF CALIFORNIA

No. Cv F-88-98 EDP

RIVERBEND FARMS, INC., a California corporation, SUNNY

CovVE CITRUS ASSOCIATION, a California cooperative,

corp., BELRIDGE PACKING Co., a California corp.; SE-

QUOIA ORANGE COMPANY, INC., a California corp.; and

EXETER ORANGE COMPANY, INC., a California corp.,

Plaintiffs,

Vv.

CLAYTON K. YEUTTER,* Secretary of Agriculture

of the United States,

Defendant.

MEMORANDUM DECISION RE:

CROSS MOTIONS FOR SUMMARY JUDGMENT

[Filed May 31, 1989]

Plaintiffs commenced this action by petitions filed pur-

suant to 7 U.S.C. § 608¢(15) (A), relating to the Federal

Marketing Order regulating the marketing of navel

oranges grown in Arizona and designated parts of Cali-

fornia. See 7 C.F.R. Part 907. It is conceded that plain-

tiffs are “handlers” of Navel oranges as that term is de-

fined in the Code of Federal Regulations. Plaintiffs con-

duct their business within the State of California.

*Clayton K. Ceutter succeeded Richard Lyng as Secretary of

Agriculture on February 16, 1989, and should be substituted as

defendant in this suit. No further action is necessary to continue

this suit, by reason of the last sentence of 42 U.S.C. § 405(g), and

Fed.R.Civ.P. 25(d).

ab iat Seas ites rane pa kA eel: ORO hs ci » ‘ aete

23a

Plaintiffs enjoyed some success in the original adminis-

trative hearings. The Administrative Law Judge granted

plaintiffs petition on the three (3) grounds asserted by

plaintiffs in their appeal before this court.

The Secretary appealed the decision of the Administra-

tive Law Judge. Judicial Officer Campbell reversed the

Administrative Law Judge’s decision and dismissed plain-

tiffs’ petition. Plaintiffs now appeal the Secretary’s final

determination under 7 U.S.C. § 608¢(15) (B) which pro-

vides in pertinent part as follows:

The District Courts of the United States (includ-

ing the Supreme Court of the District of Columbia

[District Court of the United States for the District

of Columbia]) in any district in which such handler

is an inhabitant, or has his principal place of busi-

ness, are hereby vested with jurisdiction in equity

to review such ruling, provided a bill in equity for

that purpose is filed within twenty days from the

date of the entry of such ruling. Service of process

in such proceedings may be had upon the Secretary

by delivering to him a copy of the bill of complaint.

If the court determines that such ruling is not in

accordance with law, it shall remand such proceed-

ings to the Secretary with directions either (1) to

make such ruling as the court shall determine to be

in accordance with law, or (2) to take such further

proceedings as, in its opinion, the law requires.

The hearing officer, in rejecting plaintiffs’ appeal,

focused in part on the benefit that Sunkist Growers Inc.,

a cooperative marketing association of orange growers,

obtained from the navel orange order. First of all, the

hearing officer pointed out that the Senate report on the

1935 Act recognized that cooperative associations would

be reinforced by these provisions.

Next the hearing officer pointed out that the Supreme

Court itself had given its blessing to the provisions of the

24a

code, namely that 7 U.S.C. $ 608¢(12) gave the coopera-

tives an acknowledged edge in being able to vote on be-

half of all of its members.

Further, the hearing officer rejected some of the con-

clusions that plaintiffs drew from the evidence with refer-

ence to the relative strength of District 1 as opposed to

District 2.

I. Notice and Comment Requirements of 5 U.S.C.

§ 551.

~_—_———

Plaintiffs’ first argue that the Secretary failed to com-

ply with the “notice and comment” requirements of 5

U.S.C. § 551-553.

Section 553 outlines the procedure to be followed in the

agency’s rule-making process. One court held that regula-

tions issued pursuant to marketing orders promulgated

under 7 U.S.C. § 608¢ are subject to the procedure pro-

scribed by this section. See Walter Holm & Company v.

Hardin, 449 F.2d 109 (D.C.Cir.1971). The Navel Orange

Marketing Order, i.e., Marketing Order 907, was promul-

gated in 1953 after the Secretary had given notice and an

opportunity for a hearing. The order was submitted to

producers and handlers for their approval, and then went

into effect. The marketing order only covers the domestic

fresh orange market. Oranges that are subject to export

are exempted.

The orange producing area is divided into prorate dis-

tricts. This division occurred because the Secretary recog-

nized that there are general differences in maturity dates

| and keeping quality of the oranges grown in the various

geographical sections. See 7 C.F.R. § 907.66. The pro-

duction area subject to the order is divided into four (4)

districts. The Central Valley of California, and these

plaintiffs. are included in District 1.

The marketing order authorizes_the Secretary to impose

weekly restrictions on the amount of oranges any dis-

= ———

oi Bley etalon 6A We

25a

trict may ship. This determination is to be governed by

the Secretary’s finding that such a quota will effectuate

the purposes of the Act. The fact that oranges may ex-

ceed the parity price shall not impinge the Secretary’s

discretion. Finally, the Secretary may increase the quota

anytime prior to or during the week. See 7 C.F.R.

$ 907.52. Regulation 907.110 provides for an equity fac-

tor to be used in determining the quota for each district.

The equity factor for each district must be equal. The

equity factor is a percentage of an orange tree crop that

reflects the number of oranges in each district for which

there will be equitable marketing opportunities under the

volume regulations for the ensuing season. See 7 C.F.R.

§ 907.110.

A. Secretary’s Annual Position Paper

Each year the Navel Orange Administrative Executive

Committee drafts a marketing policy for the ensuing

year. The completed draft is presented to the full Navel

Orange Administrative Committee at a public hearing.

Once the Navel Orange Administrative Committee ap-

proves the policy, public meetings are held. If adopted

as a result of this public meeting (and it generally is),

the policy statement is forwarded to the Secretary of

Agriculture. The position of the United States Depart-

ment of Agriculture is summarized in a position paper

that makes broad projections of the volume of oranges

that will be subject to volume restrictions, and discusses

the information upon which the production projections are

based.

In implementing the marketing policy, the Navel Orange

Administrative Committee recommends any necessary

volume restrictions the week before they are imposed.

See 7 C.F.R. § 907.51. When the Secretary finds that

limiting the quantity of oranges that may be handled in

each prorate district during a specified week will tend to

effectuate the purposes of the Act, the Secretary shall fix

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such quantity as the quantity of oranges that may be

marketed during that week’s period. See 7 C.F.R.

§ 907.52.

It should be noted that the Secretary has imposed vol-

ume restrictions during each of the growing seasons from

1974-75 through 1984-85.

The scope of review in these cases was defined in Prune

Bargaining Association v. Butz, 444 F.Supp. 785, 790

(N.D.Cal.1975), affd., 571 F.2d 1132 (9th Cir, 1978).

The jurisdiction granted the court is limited to an

inquiry as to whether the Secretary’s ruling is in ac-

cordance with law. The court is confined to review-

ing the record of the Section 608¢(15) (A) proceed-

ing; the court can overturn the administrative deter-

mination only if it finds the Secretary’s decision ar-

bitrary, capricious or not supported by substantial

evidence. Citizens to Preserve Overton Park v. Volpe,

401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971);

Lewes Dairy, Inc. v. Freeman, 401 F.2d 308, 315-

316 (3d Cir. 1968), cert. denied sub nom., Lewes

Dairy, Inc. v. Hardin, 394 U.S, 929, 89 S.Ct. 1187,

22 L.Ed.2d 455 (1969); Chiglades Farm, Ltd., v.

Butz, supra. This statutorily defined manner of chal-

lenging the Secretary’s marketing orders and other

regulations is expressly limited to handlers, how-

ever,...

Plaintiffs complain that the Secretary violated the re-

quirements of the Administrative Procedure Act govern-

ing informal rule-making by promulgating the annual

position paper.

Section 553 of Title 5 of the United States Code pro-

scribes the notice and hearing procedures to be applied

in rule-making, and exempts interpretative rules, general

statements of policy, or rules of agency organization pro-

cedure or practice from its provisions. The Secretary

contends that this exemption would serve to eliminate

27a

the need for notice and hearing of the issuance of the

position paper. A reading of the position paper reveals

that the statements contained therein merely express the

Secretary’s expectations for the crop yield for the coming

year. The position paper acts only to protect [sic] the up-

coming crop and the factors which may influence the

market. Announcements are based solely on estimates.

They do not set the equity factor, the prorate basis, or

the shipping schedules. The underlying marketing or-

der, on the other hand, which was adopted after notice

and hearing, provides that the volume restrictions may

be implemented to effectuate the purposes of the Act.

The marketing regulations provide that the Secretary

possesses total discretion to judge the annual shipments,

as well as to choose each week whether to impose volume

regulations. See 7 C.F.R. § 907.52. A reading of the

position paper reveals that it simply announces the

Agency’s tentative plans for the future. Indeed, the judi-

cial officer specifically found that the weekly shipping

policy found in the Navel Orange Administrative Com-

mitee’s marketing policy is rarely identical to the volume

regulation promulgated by the Secretary for any given

week. ‘

The mere fact that the Secretary used volume restric-

tions in almost every season since the order was promul-

gated, does not mean that he is mandated to do so. The

recognition that volume restrictions might be implemented

in a growing season does not in any way infringe the

Secretary’s discretion to use them or not to use them.

The Secretary is free to impose them or not.

B. Weekly volume and shipping regulations.

Plaintiffs next argue that the weekly regulations, that

control the volume of crop to be shipped into the open

market, are subject to the notice and comment require-

ment of 5 U.S.C. § 553. They argue that the “good cause”

exception to the notice and comment requirement is to be

28a

used only when emergencies prevent the Agency from hav-

ing time to conform to the notice and comment require-

ments.

In Buschmann v. Schweiker, 676 F.2d 352, 357 (9th

Cir. 1982), a panel of the Ninth Circuit observed:

The notice and comment procedures in Section 553

should be waived only when “delay would do real

harm.” U. S. Steel v. U. S. Environmental Protec-

tion, supra, 595 F.2d at 214. The good cause excep-

tions is essentially an emergency procedure. This

court would not permit the Environmental Protection

Agency to rely solely on statutory deadlines to satisfy

the good cause exception in enacting clean air stand-

ards. Western Oil & Gas v. United States, E.P.A.,

633 F.2d 8038, 810-813 (9th Cir. 1980). Accord:

State of N.J. v. U. S. Environmental Protection, 626

F.2d 1038 (D.C.Cir.1980); U. S. Steel Corp. v.

United States Environmental Protection, supra,

Sharon Steel Corp. v. Environmental Protection

Agency, 597 F.2d 377 (3d Cir. 1979).

“When substantive judgments are committed to

the very broad discretion of an administrative

agency, procedural safeguards that assure the

public access to the decision-maker should be

vigorously enforced. This we believe is sound

policy ...” Western Oil & Gas v. United States

E.P.A., 633 F.2d at 818.

The judicial officer’s answer to plaintiffs’ argument

that the weekly volume restrictions were improperly and

routinely exempted from the provisions of 5 U.S.C. § 553

is answered beginning at page 79 of the Findings of Fact

and page 190 of the General Discussion. The judicial offi-

cer demonstrated by chart that the practice engaged in

by the Navel Orange Administrative Committee did not

allow for the notice and comment provisions of 5 U.S.C.

§ 553 to be implemented. Starting at page 190, the judi-

a aianiaeanalatiniaaa eae ail

29a

cial officer discussed the activities of Mr. Pescosolido, a

principal of one of the plainitffs in this case. Unfortu-

nately, this discussion is wide of the mark. It does not

come to grips with the provisions of the section and the

purposes of the congressional mandate.

The Court is aware that from time to time, conditions

will arise that make it important for the prorate quotas

to be tested on short notice, i.e., weather conditions which

limit the number of oranges that may be shipped; rain

conditions which make harvest impossible or impractical.

However, as pointed out by the judicial officer’s decision

in this case, the practice is constant, and no attempt has

been made to limit the practice to those cases where

intervening forces of nature make it imperative that the

regulations be issued without the necessity or possibility

of public comment.

In Levesque v. Block, 723 F.2d 175, 184 (1st Cir.

1983), the Circuit Court had occasion to analyze sub-

Stantively the basis for claims for good cause. In that

case the Court stated:

We also analyzed the three bases the statute provides

for a claim of good cause: impracticability, lack of ne-

cessity, and the public interest, 4 [sic] U.S.C. § 553(b)

(B) (1982). Impracticability was said to exist when

the agency could not both follow section 553 and exe-

cute its statutory duties. See 619 F.2d at 145. Public

procedures are “unnecessary,” we concluded, when

the regulation is technical or minor. See id. Finally,

““{plublic interest’? supplements the terms ‘imprac-

ticable’ or ‘unnecessary’; it requires that public rule-

making procedures shall not prevent an agency from

operating and that, on the other hand, lack of publie

interest rule-making warrants an agency to dispense

with public procedure.”

It appears that the judicial officer’s determination on

this point is not in accordance with law.

30a

II. The Department’s Unequal Application of Volume

Restrictions, vis-a-vis, District 1 and District 2.

Finding twenty-two (22) of the judicial officer’s deci-

sion states that in the 1982-83, 1988-84, and 1984-85

seasons, District 1 was subject to volume restrictions

while no comparable restrictions were placed on Districts

2, 3 and 4. During some of the other seasons under

consideration, volume restrictions were started later in

Districts 2, 3 and 4 and ended earlier in Districts 2, -3,

and 4 than that of District 1.

Section 608¢(6)(C) of Title 7 of the United States

Code provides that the marketing order may limit amounts

which each handler may market under a uniform rule

based upon the amounts which each handler has available

for current shipment. This section was interpreted in

American Fruit Growers v. United States, 105 F.2d 722,

726 (9th Cir. 1939) as follows:

By 7 U.S.C. § 608¢(6)(C) the Secretary of Agri-

culture may, after hearing, either make an allotment,

or provide a method for allotment. By Order No. 2,

the Secretary provided only a method. The provision

of the act merely requires the allotment be made

“under a uniform rule’. The rule adopted by the

Secretary is uniform, in that all handlers are allotted

a quality by the same method or rule. The “uniform

rule” is required to be “based upon the amounts

which each such handler has available for current

shipment”. It is apparent, we think, that the rule

had such a basis, for it was based upon the amounts

which each such handler had available for current

“seasonal” shipment.

| Clearly then, the section only provides that the rule used

| to determine the allotments be uniformly applied. The

| rule does not require that an alloment must be equal

| among several districts. 3

sla

Section 907.110 of Title 7 of the United States Code

proscribes the procedure whereby equity of marketing

opportunity will be afforded each of the prorate districts.

Section A requires the Committee to establish an equity

factor which will be the same for all prorate districts.

The equity factor shall be stated as a percentage of the

tree crop in each district, and shall reflect a quantity of

oranges grown in each district for which there will be

equitable marketing opportunity. At marketing policy

committee for each prorate district, the Committee shall

formulate a weekly shipping schedule for the ensuing

season, reflecting insofar as practicable the desire of

growers and handlers of oranges within the district as

to the quantity of oranges grown in that district to be

shipped under volume regulations each week. Subpara-

raph C provides that following each meeting, the Com-

mittee may review and make equitable modifications in

the equity favor in the weekly shipping schedule. Sub-

paragarph D mandates the timing of the shipping sched-

ule. Subparagraph E delineates the factors which the

committee must take into account in making its weekly

recommendations. Subparagraph F requires the Com-

mittee to make such adjustment as it deems necessary to

reflect changing crop or marketing conditions. Subpara-

graph G requires the committee to make calculations as to

the percentage of the total tree crop that will be handled

under volume restrictions and to prepare an estimate of

weekly shipments based thereon.

In his Findings, the judicial officer demonstrated that

taking the figures available for the growing seasons 1974-

75 to 1983-84, District 1 shipped 66.30% of its product

in the fresh domestic market, whereas District 2 shipped

only 33.30% of its product in the fresh domestic market.

During the same period, District 1 shipped 3.80% in

the fresh export market, while District 2 shipped 37.30%

in the fresh domestic market. It should be noted that

export shipments are not included within the-calculations

82a

for shipment quoted. By a series of tables beginning at

page ninety-two (92) covering the 1980-81, 1981-82,

1982-83, 1983-84 seasons, the evidence demonstrates that

the seasons start earlier in District 1 and last substan-

tially longer than in District 2. Further, the shipments

from District 1 exceeded the shipments from District 2

in the fresh domestic market by amounts from 40 to 1

to 35 to 1. Indeed, the chart would indicate that there is

a general decline of production in District 2 as opposed to

District 1.

In viewing the foregoing evidence, the Court cannot

Say as a matter of law that the judicial officer’s version

of the evidence is incorrect.

III. The Secretary Failed to Engage in Reason Deci-

sion Making in Approving the Recommendations of the

Navel Orange Administrative Committee.

In their attack on the weekly volume recommendations,

plaintiffs rely on the testimony of John Ford, the Deputy

Assistant Secretary for Marketing and Inspection Serv-

ices. Ford testified that he did not have information from

which he could determine whether the volume restrictions

effectuated the purposes of the Act. However, the judicial

officer pointed out that Assistant Secretary McMillan and

Assistant Secretary Ford were not involved in promul-

gating the weekly restrictions. Therefore, the only rele-

vant testimony in the record was the testimony of Mr.

Chioffi, the Chief of the Marketing Agreements Section.

Chioffi was the United States Department of Agriculture

Marketing Specialist until 1977. As such, he was respon-

sible for receiving the statistical wire from the Los

Angeles representative of the Department, analyzing the

information and comparing it to prior years, and receiv-

ing the information as to what had transpired at the

weekly Navel Orange Administrative Committee meet-

ings. This latter information was supplied to Chioffi by

telephone call from the field representative. The tele-

phone call would be followed up by a written report that

33a

included the Navel Orange Administrative Committee’s

dissenting views. Chioffi would then obtain price-

marketing data and prepare an impact statement sum-

marizing and evaluating the data used. Chioffi was iden-

tified by the judicial officer as the only witness “knowl-

edgeable concerning the promulgation of the weekly vol-

ume limitations by the United States Department of

Agriculture.”

The judicial officer noted that although it was a rarity,

occasionally the recommendations of the Navel Orange

Administrative Committee were not accepted by the De-

partment. However, plaintiffs have failed in their attempt

to show that the procedure was sémehow flawed in its

operation on the orange production allotments.

CONCLUSION

All of the seasons which have been put in issue have

since passed. Plaintiffs have presented no evidence that

but for the violation of the notice and comment require-

ment, the marketing orders would have resulted in dif-

ferent shipping restrictions in the marketing orders.

Consequently, plaintiffs have not proven any damage suf-

fered by them.

Accordingly, the Court remands the matter to the

Secretary to enter an order requiring the Orange Admin-

istrative Committee to comply with the provisions of

5 U.S.C. § 553(b) or, alternately, when the Orange Ad-

ministrative Committee determines that compliance with

that section may be waived, to make findings of fact that

justifies a waiver of such requirement as provided in

5 U.S.C. § 553 (b) (3) (B).

DATED: May 81, 1989

/s/ Edward Dean Price

EDWARD DEAN PRICE

United States District Judge

34a

STATUTES AND REGULATIONS INVOLVED

5 U.S.C. § 553. Rule making

(a) This section applies, according to the provisions

thereof, except to the extent that there is involved—

(1) a military or foreign affairs function of the

United States; or

(2) a matter relating to agency management or

personnel or to public property, loans, grants, bene-

fits, or contracts.

(b) General notice of proposed rule making shall be

published in the Federal Register, unless persons subject

thereto are named and either personally served or other-

wise have actual notice thereof in accordance with law.

The notice shall include—

(1) a statement of the time, place, and nature

of public rule making proceedings;

(2) reference to the legal authority under which

the rule is proposed; and

(3) either the terms or substance of the proposed

rule or a description of the subjects and issues

involved.

Except when notice or hearing is required by statute,

this subsection does not apply—

(A) to interprettive rules, general statements of

policy, or rules of agency organization, procedure, or

practice; or

(B) when the agency for good cause finds (and

incorporates the finding and a brief statement of

reasons therefor in the rules issued) that notice and

public procedure thereon are impracticable, unneces-

sary, or contrary to the public interest.

shall give interested persons an opportunity to participate

in the rule making through submission of written data,

35a

views, or arguments with or without opportunity for oral

presentation. After consideration of the relevant matter

presented, the agency shall incorporate in the rules adopted

a concise general statement of their basis and purpose,

When rules are required by statute to be made on the

record after opportunity for an agency hearing, sections

556 and 557 of this title apply instead of this subsection.

(d) The required publication or service of a substan-

tive rule shall be made not less than 30 days before its

effective date, except—

(1) a substantive rule which grants or recog-

nizes an exemption or relieves a restriction ;

(2) interpretative rules and statements of policy;

(3) as otherwise provided by the agency for good

cause found and published with the rule.

(e) Each agency shall give an interested person the

right to petition for the issuance, amendment, or repeal

of a rule.

(Pub. L. 89-554, Sept. 6, 1966, 80 Stat. 383.)

5 U.S.C. § 706. Scope of review

To the extent necessary to decision and when pre-

sented, the reviewing court shall decide all relevant ques-

tions of law, interpret constitutional and statutory pro-

visions, and determine the meaning or applicability of

the terms of an agency action. The reviewing court

shall—

(1) compel agency action unlawfully withheld or

unreasonably delayed; and

(2) hold unlawful and set aside agency action,

findings, and conclusions found to be—

(A) arbitrary, capricious, an abuse of discre-

tion, or otherwise not in accordance with law;

36a

(B) contrary to constitutional right, power,

privilege, or immunity;

thority, or limitations, or short of statutory

right;

(D) without observance of procedure required

by law;

(E) unsupported by substantial evidence in a

case subject to sections 556 and 557 of this title

or otherwise reviewed on the record of an agency

hearing provided by statute; or

(F) unwarranted by the facts to the extent

that the facts are subject to trial de novo by the

reviewing court.

In making the foregoing determinations, the court shal]

review the whole record or those parts of it cited by a

party, and due account shall be taken of the rule of

prejudicial error.

(Pub. L. 89-544, Sept. 6, 1966, 80 Stat. 393.)

7 U.S.C. $601. Declaration of conditions

It is declared that the disruption of the orderly ex-

change of commodities in interstate commerce impairs

the purchasing power of farmers and destroys the value

of agricultural assets which support the national credit

structure and that these conditions affect transactions in

agricultural commodities with a national public interest,

and burden and obstruct the normal channels of interstate

commerce.

May 12, 1933, c. 25, Title I, $1, 48 Stat. 31; June 38,

1937, c. 296, $$ 1, 2(a), 50 Stat. 246.

37a

7 U.S.C. § 602. Declaration of policy; establishment of

price basing period; marketing standards; orderly sup-

ply flow; circumstances for continued regulation

It is declared to be the policy of Congress—

(1) Through the exercise of the powers conferred upon

the Secretary of Agriculture under this chapter, to estab-

lish and maintain such orderly marketing conditions for

agricultural commodities in interstate commerce as will

establish, as the prices to farmers, parity prices as defined

by section 1801 (a) (1) of this title.

(2) To protect the interest of the consumer by (a)

approaching the level of prices which it is declared to be

the policy of Congress to establish in subsection (1) of

this section by gradual correction of the current level at

as rapid a rate as the Secretary of Agriculture deems to

be in the public interest and feasible in view of the cur-

rent consumptive demand in domestic and foreign markets,

and (b) authorizing no action under this chapter which

has for its purpose the maintenance of prices to farmers

above the level which it is declared to be the policy of

Congress to establish in subsection (1) of this section.

* * * *

(4) Through the exercise of the powers conferred upon

the Secretary of Agriculture under this chapter, to estab-

lish and maintain such orderly marketing conditions for

any agricultural commodity enumerated in section 608¢

(2) of this title [which includes fruits] as will provide,

in the interests of producers and consumers, an orderly

flow of the supply thereof to market throughout its normal

marketing season to avoid unreasonable fluctuations in

supplies and prices.

7 U.S.C. § 608c. Orders regulating handling of com-

modity

* * * *

38a

(6) Other commodities; terms and conditions of orders

In the case of the agricultural commodities and the prod-

ucts thereof, other than milk and its products, specified in

subsection (2) of this section [including fruits] orders

issued pursuant to this section shall contain one or more

of the following terms and conditions, and (except as

provided in subsection (7) of this section), no others:

* * * *

amount of any such commodity or product, or any grade,

size, or quality thereof, which each handler may market in

or transport to any or all markets in the current of inter-

states or foreign commerce or so as directly to burden,

obstruct, or affect interstate or foreign commerce in such

commodity or product thereof, under a uniform rule based

upon the amounts which each such handler has available

for current shipment, or upon the amounts shipped by

each such handler in such prior period as the Secretary

determines to be representative, or both, to the end that

the total quantity of such commodity or product, or any

grade, size, or quality thereof, to be marketed in or trans-

ported to any or all markets in the current of interstate

or foreign commerce or so as directly to burden, obstruct,

or affect interstate or foreign commerce in such commodity

or product thereof, during any specified period or periods

shall be equitably apportioned among all of the handlers

thereof.

x “ * *

(7) Terms common to all orders

In the case of the agricultural commodities and the

products thereof specified in subsection (2) of this section

orders shall contain one or more of the following terms

and conditions:

Agriculture, or a method for the selection, of an agency

penn a We nian inal bigo

39a

or agencies and defining their powers and duties, which

shall include only the powers:

(i) To administer such order in accordance with its

terms and provisions;

(ii) To make rules and regulations to effectuate

the terms and provisions of such order;

(iii) To receive, investigate, and report to the

Secretary of Agriculture complaints of violations of

such order; and

(iv) To recommend to the Secretary of Agricul-

ture amendments to such order.

(D) Incidental to, and not inconsistent with, the terms

and conditions specified in subsections (5) to (7) of this

section and necessary to effectuate the other provisions of

such order.

(11) Regional application

(A) No order shall be issued under this section which

is applicable to all production areas or marketing areas,

or both, of any commodity or product thereof unless the

Secretary finds that the issuance of several orders ap-

plicable to the respective regional production areas or

regional marketing areas, or both, as the case may be,

of the commodity or product would not effectively carry

out the declared policy of this chapter.

(B) Except in the case of milk and its products, orders

issued under this section shall be limited in their appli-

cation to the smallest regional production areas or re-

gional marketing areas, or both, as the case may be,

which the Secretary finds practicable, consistenly with

carrying out such declared policy.

plicable to the same commodity or product thereof shall,

40a

so far as practicable, prescribe such different terms, ap-

plicable to different production areas and marketing

areas, as the Secretary finds necessary to give due recog-

nition to the differences in production and marketing of

such commodity or product in such areas.

* * % *

(16) Termination of orders and marketing agreements

(A) The Secretary of Agriculture shall, whenever he

finds that any order issued under this section, or any

provision thereof, obstructs or does not tend to effectuate

the declared policy of this chapter, terminate or suspend

the operation of such order or such provision thereof.

* * * *

hee kL

$907.4 Production area.

“Production area” means the State of Arizona and that

part of the State of California south of a line drawn due

east and west through the present post office in Red

Bluff, Calif.

$907.5 Oranges.

“Oranges” means those oranges .. . commonly known

as navels, and which are grown in the production area,

$907.7 Committee.

“Committee” means the Navel Orange Administrative

Committee established pursuant to § 907.20.

$907.9 Handler.

“Handler” means any person who handles oranges,

$907.10 Handle.

“Handle” means to buy, sell, consign, transport, or

ship oranges .. . or in any other way to place oranges

bilan AMR stem ce

4la

in the current of commerce, between the State of Cali-

fornia and any point outside thereof in the continental

United States, Alaska,* or Canada, or within the State

of California, or between the State of Arizona and any

point outside thereof in the continental United States,

Alaska,* or Canada, or within the State of Arizona... .

§ 907.11 Oranges available for current shipment.

“Oranges available for current shipment” means all

oranges as measured by the total tree crop.

§ 907.12 Tree crop.

“Tree crop” means the total quantity of oranges on the

trees as determined by the committee.

§ 907.18 Export.

“Export” means shipments of oranges to points outside

the continental United States, Canada and Alaska.*

Administrative Body

§ 907.20 Establishment and membership.

There is hereby established a Navel Orange Adminis-

trative Committee consisting of 11 members, for each of

whom there shall be one alternate, and for each grower

member an additional alternate. Six of the members

and their respective alternates shall be growers. Four of

the members and their respective alternates shall be

handlers, or employees of handlers, or employees of cen-

tral marketing organizations. One member cf the com-

mittee and an alternate of such member shz!l be nomi-

nated as provided in § 907.22(f) ....

% On January 11, 1985, “Alaska” was deleted through the amend-

ment of this provision (50 Fed. Reg. 1429, 1430 (1985) ). Many

of the provisions that follow, which controlled the issuance of pro-

rate and the weekly allocations of prorate, were also changed by the

amendments of January 11, 1985.

42a

§$ 907.22 Nominations.

(b) Any cooperative marketing organization, or the

growers affiliated therewith, which handled more than

50 percent of the total volume of oranges during the

fiseal year in which nominations for members and alter-

nate members of the committee are submitted shall nom-

inate three grower members, three alternate grower mem-

bers, three additional alternate grower members, two

handler members, and two alternate handler members of

the committee.

market oranges and which are not qualified under para-

graph (b) of this section, or growers affiliated therewith,

shall nominate one grower member, one alternate grower

member, one additional alternate grower member, one

handler member, and one alternate handler member.

(d) All growers who are not affiliated with a cooperat-

ing marketing organization which markets oranges shall

nominate two grower members, two alternate grower

members, two additional grower members, one handler

member, and one alternate handler member.

§ 907.28 Powers.

The committee shall have the following powers:

(a) To administer the provisions of this part in ac-

cordance with its terms;

(b) To make and adopt rules and regulations to ef-

fectuate the terms and provisions of this part;

complaints of violations of the provisions of this part;

and

(d) To recommend to the Secretary amendmens to this

part.

43a

§ 907.29 Duties.

The committee shall have the following duties:

(a) To select a chairman and such other officers as

may be necessary, and to define the duties of such offi-

cers;

(b) To appoint such employees, agents, and representa-

tives as it may deem necessary, and to determine the

compensation and to define the duties of each;

each fiscal year a budget for such fiscal year, including

a report in explanation of the items appearing therein

and a recommendation as to the rate of assessment for

such fiscal year;

(d) To keep minutes, books, and records which will

reflect all of the acts and transactions of the committee

and which shall be subject to examination by the Secre-

tary;

(e) To prepare a monthly statement of the financial

operations of the committee and to make copies of each

such statement available to growers and handlers for

examination at the office of the committee;

((f) To cause its books to be audited by a certified

public accountant at least once each fiscal year, and at

such other times as the Secretary may request ;

(g) To act as intermediary between the Secretary and

any grower or handler;

(h) To provide an adequate system for determining

the total quantity of oranges available for current ship-

ment, and to make such determinations, including de-

terminations by grade, size, and maturity conditions, as it

may deem necessary, or as may be prescribed by the Sec-

retary, in connection with the administration of this part;

(i) To investigate the growing, handling, and market-

ing conditions with respect to oranges, and to assemble

data in connection therewith;

44a

(j) To submit to the Secretary such available informa-

tion, including verified reports, as he may request;

(k) To notify producers and handlers of meetings of

the committee to consider recommendations for regulation;

(1) To consult with such representatives of growers or

groups of growers as may be deemed necessary and to pay

the travel expenses incurred by such representatives in

attending committee meetings at the request of the com-

mittee: Provided, That the committee shall not pay the

travel expenses of more than three such representatives in

connection with any one meeting of the committee;

(m) To investigate compliance with the provisions of

this part; and

(n) With the approval of the Secretary, to reapportion

the number of grower members or handler members on

the Navel Orange Administrative Committee who are

nominated pursuant to § 907.22(c) and (d). Any such

reapportionment shall be based, insofar as practicable,

upon the proportionate amount of navel oranges handled

by the respective types of marketing organizations: Pro-

vided, That each of the grower groups described in

§ 907.22(c) and (d) shall be entitled to nominate at least

one grower member and one handler member together with

their respective alternates.

Regulation

$ 907.50 Marketing policy.

(a) Prior to the recommendation for regulation for each

prorate district, the committee shall submit to the Sec-

retary its marketing policy for the ensuing season. Such

marketing policy shall contain the following information:

{1) the available crop of oranges in the prorate district,

including estiraated quality and composition of sizes; (2)

the estimated utilization of the crop, showing the quan-

45a

tity and percentages of the crop that will be marketed in

domestic, export, and by-product channels, together with

quantities otherwise to be disposed of; (3) a schedule of

estimated weekly shipments to be recommended to the

Secretary during the ensuing season; (4) available sup-

plies of competitive oranges in all producing areas of the

United States; (5) level and trend of consumer income;

(6) estimated supplies of competitive citrus commodities ;

and (7) any other pertinent factors bearing on the mar-

keting of oranges. In the event that it becomes advisable

to substantially modify such marketing policy the commit-

tee shall submit to the Secretary a revised marketing

policy setting forth the information as required in this

paragraph.

b) All meetings of the committee held for the purpose

of formulating such marketing policies shall be open to

growers and handlers. The committee shall give notice to

growers by publication of notice of such meetings in such

newspapers as they deem appropriate and shall advise all

handlers by mail of such meetings.

(ec) The committee shall transmit a copy of such mar-

keting policy report or revision thereof to the Secretary

and to each grower and handler who files a request there-

for. Copies of all such reports shall be maintained in the

office of the committee where they shall be available for

examination by growers and handlers.

8 907.51 Recommendation for volume regulation.

(a) The committee may recommend to the Secretary

the total quantity of cranges which it deems advisable to

be handled during the next succeeding week in each pro-

rate district. If, for any reason, the committee recom-

mends the issuance of volume regulation but fails to

recommend to the Secretary the total quantity of oranges

which it deems advisable to be handled during the next

succeeding week in each prorate district, reports repre-

senting the respective views of the committee members

46a

with respect to its failure to act shall be submitted

promptly to the Secretary.

(b) In making its recommendation, the committee shall

provide equity of marketing opportunity to handlers in

all districts and shall give due consideration to the follow-

ing factors: (1) Market prices for oranges, including

market prices by grades and sizes: (2) supply of oranges

on track at, and enroute to, the principal markets: (3)

Supply, maturity, and condition of oranges in the area of

production, including the grade and size composition

thereof; (4) market prices and supplies of citrus fruits

from California, Arizona, and competitive producing

areas, and supplies of other competitive fruits; (5) trend

and level in consumer income; and (6) other relevant

factors.

pursuant to § 907.52, has fixed the quantity of oranges

which may be handled, the committee may, if such action

is deemed advisable, recommend to the Secretary that such

quantity be increased for such week. Any such recom-

mendation, together with the committee’s reasons for such

recommendation, shall be submitted promptly to the Sec-

retary.

(d) The committee shall, with the approval of the Sec-

retary, adopt procedural rules and regulations to effectu-

ate the provisions of this § 907.51.

$ 907.52 Issuance of volume regulation.

Whenever the Secretary shall find, from the recom-

mendations and information submitted by th: committee,

or from other available information, that to limit the

quantity of oranges which may be handled in each pro-

rate district during a specified week will tend to effectuate

- the declared policy of the act, he shall fix such qu

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