                                                                           FILED
                            NOT FOR PUBLICATION                             OCT 02 2012

                                                                       MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS




                           FOR THE NINTH CIRCUIT

MARVIN D. HORNE, et al.,                         No. 11-15748

              Plaintiffs - Appellants,           D.C. No. 1:09-cv-01790-OWW-
                                                 SKO
  v.

UNITED STATES DEPARTMENT OF                      MEMORANDUM *
AGRICULTURE, et al.,

              Defendants - Appellees.



                    Appeal from the United States District Court
                        for the Eastern District of California
                    Oliver W. Wanger, District Judge, Presiding

                    Argued and Submitted September 14, 2012
                            San Francisco, California

Before: ALARCON, GRABER, and BERZON, Circuit Judges.

       Marvin D. Horne, Laura R. Horne, and Raisin Valley Farms Marketing, LLC

(“the Hornes”) petitioned the United States Department of Agriculture (“USDA” or

“the agency”) to engage in rulemaking to change the agency’s regulations

governing service of final agency orders. USDA denied the petition, and the



        *
         This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
district court upheld the agency’s decision. We have jurisdiction under 28 U.S.C.

§ 1291 and remand to the agency for further explanation of its reasons for denying

the Hornes’ petition.

      The Hornes are California raisin producers. USDA regulates raisin

production according to the Raisin Marketing Order (“RMO”), 7 C.F.R. § 989.1 et

seq., promulgated under the Agricultural Marketing Agreement Act of 1937

(“AMAA”), 7 U.S.C. § 601 et seq. In March 2007, the Hornes petitioned the

agency pursuant to AMAA § 608c(15)(A), seeking an exemption from the RMO.

A Judicial Officer (“JO”) dismissed the petition.

      Under section 608c(15)(B) of the AMAA, the U.S. District Courts have

jurisdiction to review final agency orders, so long as the complaint “is filed within

twenty days from the date of the entry of such ruling.” 7 U.S.C. § 608c(15)(B).

USDA’s “Rules of Practice Governing Procedures on Petitions to Modify or to Be

Exempted from Marketing Orders” (“Rules of Practice”), 7 C.F.R. §§ 900.50 et

seq., provide that a final agency order “shall be filed with the hearing clerk, who

shall serve it upon the parties.” Id. § 900.66(b). Section 900.69(b) of the Rules of

Practice instructs that

      Service shall be made either (1) by delivering a copy of the document or
      paper to the individual to be served . . . ; or (2) by leaving a copy of the
      document or paper at the principal office or place of business of such


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      individual . . . ; or (3) by registering and mailing a copy of the document or
      paper, addressed to such individual . . . at his or its last known principal
      office, place of business, or residence. Proof of service hereunder shall be
      made by the affidavit of the person who actually made the service. The
      affidavit contemplated herein shall be filed with the hearing clerk, and the
      fact of filing thereof shall be noted on the docket of the proceeding.

      The Hornes were the victims of a failed notice attempt by certified mail,

which did not reach them until well-after the twenty-day time limit to seek review

in the district court. They nonetheless filed a complaint in the district court

seeking review of the JO’s decision. The district court, citing the “twenty-day

rule” in 7 U.S.C. § 608c(15)(B), dismissed the complaint for lack of subject matter

jurisdiction. Horne v. Dep’t of Agric., No. 1:08-CV-00402-OWW-SMS, 2008 WL

4911438, at *3-4 (E.D. Cal. Nov. 13, 2008) (unpublished).

      We affirmed in an unpublished memorandum disposition, but noted the

“obvious unfairness of the result.” Horne v. Dep’t of Agric., 395 F. Appx. 486,

489 (9th Cir. 2010). “[I]n response to our explicit inquiry, the USDA . . . t[ook]

the position that it lack[ed] discretion to remedy the problem” in the Hornes’

case—a position we found “dubious” under the Rules of Practice. Id.; see, e.g., 7

C.F.R. § 900.69(c) (providing for discretionary time extensions where “there is

good reason”). Nevertheless, we noted that it was “the province of the Department

and not this court” to assess the propriety of its own rules. Horne, 395 F. Appx. at



                                           3
489.

       While their earlier petition was being litigated, the Hornes filed a second

petition with the agency requesting that it “engage in rule making to amend the

Rules of Practice” to require more prompt notice such as by email or fax. See 5

U.S.C. § 553(e) (“Each agency shall give an interested person the right to petition

for the issuance, amendment, or repeal of a rule.”). The Hornes cited the failed

service by mail in their own earlier case, pointing out that the existing Rules “have

no provision for promptly and expeditiously notifying Petitioners [of final agency

orders], despite the . . . short time frames for Petitioners to appeal . . . decisions” to

the district court. USDA responded to the Hornes’ rulemaking petition—as it must

under the Administrative Procedure Act (APA), 5 U.S.C. § 555(e)1—in a one-page

letter denying the Hornes’ request. See also 7 C.F.R. § 1.28 (“Petitions by

interested persons in accordance with 5 U.S.C. § 553(e) . . . will be given prompt

consideration and petitioners will be notified promptly of the disposition made of

their petitions.”).


       1
           Title 5 U.S.C. § 555(e) provides:

              Prompt notice shall be given of the denial in whole or in part of
       a written application, petition, or other request of an interested person
       made in connection with any agency proceeding. Except in affirming
       a prior denial or when the denial is self-explanatory, the notice shall
       be accompanied by a brief statement of the grounds for denial.

                                               4
      An agency’s decision not to engage in rulemaking is entitled to a high level

of judicial deference. See Massachusetts v. EPA, 549 U.S. 497, 527-28 (2007).

Deference is especially merited where an agency’s procedural regulations are

involved. See Vt. Yankee Nuclear Power Corp. v. NRDC, 435 U.S. 519, 543

(1978) (“Absent constitutional constraints or extremely compelling circumstances

the administrative agencies should be free to fashion their own rules of procedure .

. . .” (internal quotation marks omitted)).

      At the same time, an agency must provide a “reasoned explanation for its

refusal [to initiate rulemaking].” Massachusetts, 549 U.S. at 534. Though the

Hornes’ rulemaking petition was admittedly brief, USDA’s response did not

adequately explain the basis for its decision. Instead, the denial letter primarily

cites the district court’s decision in the Hornes’ previous lawsuit challenging the

twenty-day time limit as it applied to their complaint for review of the agency’s

final order denying them an exemption from the RMO. The district court’s ruling

in that earlier case does not explain why the agency declined to consider amending

the Rules of Practice.

      Nor does USDA’s statement that it “believes that the procedures under the

applicable Rules are adequate to effectuate service of department decisions”

provide an adequate explanation for its refusal to conduct rulemaking. Cf.


                                              5
O’Keeffe’s, Inc. v. U.S. Consumer Prod. Safety Comm’n, 92 F.3d 940, 943-44 (9th

Cir. 1996) (holding that the Commission did not act arbitrarily or capriciously in

denying a rulemaking petition because it considered several factors to “determin[e]

[whether] an amendment to the regulations was . . . appropriate or necessary,” such

as “the potential benefits of the requested amendment, potential costs, and the

relation between the potential benefits and costs”).

      We emphasize that in holding that USDA’s statement of grounds was

inadequate, we do not purport to review the merits of the agency’s decision not to

amend the Rules of Practice. We hold that the agency failed to do what the APA

requires: to provide “a brief statement of the grounds for denial [of the rulemaking

petition].” 5 U.S.C. § 555(e). Here, the Hornes’ petition, although itself extremely

brief, did note the short time-frame for review of final agency orders as established

by the AMAA, cite alternative methods for providing notice, and identify at least

one case (their own) in which service of a final agency order failed, thereby

precluding judicial review. As we noted in our prior memorandum disposition

(filed after the denial of the Hornes’ rulemaking petition), the “unfairness” of

precluding review by someone who never received notice is “obvious” and could

be remedied by permitting the exercise of discretion where the agency is aware that

notice has failed. Cf. Fed. R. App. P. 4(a)(6) (“The district court may reopen the


                                           6
time to file an appeal . . . [if] (A) the court finds that the moving party did not

receive notice under Federal Rule of Civil Procedure 77(d) of the entry of the

judgment . . . sought to be appealed within 21 days after entry.”).

      In short, the Hornes’ identification of specific, viable alternative methods for

providing notice merited some brief explanation of why the agency did not find it

desirable to consider those alternatives at that time. The bare conclusion that its

existing procedural rules were "adequate" was not responsive.

      REVERSED and REMANDED to the USDA for further explanation of its

reasons for denying the rulemaking petition.




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