Archives for August 2021

BEEF PROMOTION by non-contractual third parties utilizing $1 checkoff is government speech exempt from 1st Amendment challenge by cattle producers who object to the advertising campaigns… Johnston/Morris affirmed.

The Beef Promotion & Research Act of 1985 imposes a $1 “checkoff” on each head of cattle sold to fund consumption promotions to “maintain and expand domestic and foreign markets and uses for beef and beef products.” 7 USC 2901(b) & 2904(8)(C). The Secretary of Agriculture oversees the program through the Cattlemen’s Beef Promotion & Research Board whose members he appoints. (The Beef Board elects 10 members to the Beef Promotion Operating Committee; a federation of “qualified state beef councils” including the Montana Beef Council elects the other 10 members. The Operating Committee develops promotional campaigns for the Beef Board.) A QSBC typically collects the checkoff, retaining 50 cents to fund state marketing. Producers may opt out of funding their QSBC and direct the entire assessment to the federal program.

Since 2016, the Secretary, through the Agricultural Marketing Service, has entered into MOUs with QSBCs granting the Secretary pre-approval authority over “any and all promotion, advertising, research, and consumer information plans and projects.” The Secretary also reviews and approves the QSBCs’ budgets and marketing plans which detail their anticipated expenses & disbursements and government officials can participate in QSBC meetings at which promotional and funding decisions are made. The MOUs allow the Secretary to decertify a noncompliant QSBC, terminating its access to checkoff funds.

Using checkoff funds, QSBCs can hire third parties to produce ads and other promotional materials. Some engagements involve contracts. Under the MOUs, the Secretary must pre-approve all contracts and any plans or projects developed under them. The parties agree that 3rd-party speech generated pursuant to these contracts is government speech.

But QSBCs can also make noncontractual transfers of checkoff funds to third parties to produce promotional materials. Materials produced by this method need not be pre-approved. Recipients of these transfers must identify their expenditures in an “annual accounting” and abide by principles of the Beef Act — promoting beef without being unfair, deceptive, or political. The primary issue on appeal is whether speech by third parties under these arrangements is effectively government speech.

The Ranchers-Cattlemen Action Legal Fund (R-CALF) includes producers who object to their QSBCs’ ad campaigns. R-CALF first challenged the checkoff in 2016, alleging that distribution of funds to the Montana Beef Council is an unconstitutional compelled subsidy of private speech. While that litigation was pending, MBC entered into an MOU with the Secretary. Without considering the MOU, Judge Morris entered a preliminary injunction preventing use of checkoff funds for promotional campaigns absent the producers’ consent. A divided panel affirmed the injunction; the majority declined to consider the effect of the MOU; the dissent opined that the MOU “plainly grants the Secretary complete pre-approval authority over ‘any and all promotion, advertising, research, and consumer information plans and projects’ of the MBC.”

R-CALF then amended its complaint to seek relief against 14 additional QSBCs, all of which had MOUs with the Secretary. 4 QSBCs and 3 producers intervened to defend the program. Morris granted summary judgment to the Secretary and intervenors, adopting Magistrate Johnston’s proposed findings & conclusions. Morris and Johnston found that R-CALF had standing to sue but concluded that the MOUs gave the Secretary sufficient control over the promotional program to make the QSBCs’ speech — and the speech of third parties they paid — effectively government speech. It also rejected R-CALF’s request for an injunction to ensure that the Secretary continues to enforce the MOUs. R-CALF appeals.

We agree with Morris and Johnston that R-CALF has associational standing to sue the 12 QSBCs to which its members pay checkoffs. It also has direct standing to challenge use of checkoff funds by QSBCs in states where none of its members pay checkoffs — Hawaii, South Carolina, and Vermont. Thus it must establish direct standing to sue those QSBCs. “An organization has direct standing to sue where it establishes that the defendant’s behavior has frustrated its mission and caused it to divert resources in response to that frustration of purpose.” E. Bay Sanctuary Covenant (9th Cir. 2021). R-CALF’s mission includes “protecting domestic, independent cattle producers.” It uses 60% of its resources to educate producers on use of checkoff funds by QSBCs. The beef checkoff program affects that mission and R-CALF has devoted resources, independent of expenses for this litigation, to deal with the program that might otherwise be used in support of that mission.

The critical question in determining whether speech is public or private is whether it is “effectively controlled” by the government. Johanns (US 2005). Johanns upheld the federal part of the beef checkoff program against a compelled-speech attack because “the government sets the overall message to be communicated and approves every word that is disseminated.” It “emphasized three overlapping aspects” of the federal program: Congress directed the establishment of the program including its promotional activities, Congress and the Secretary specify the general content of the promotional campaigns, and the Secretary exercises final approval authority over every word used in every promotional campaign. Applying the Johanns factors, this Court had twice upheld mandatory assessment programs against 1st Amendment attacks. Paramount Land (9th Cir. 2007) refused to enjoin a California statute providing subsidies from assessments of pistachio sales to the California Pistachio Commission because the State had specified the goal of the program — to promote pistachio sales — and exercised control over messaging. Delano Farms (9th Cir. 2009) upheld similar compulsory assessments on California table grape growers, citing a legislative directive that went “much further in defining the Commission’s message than the Beef Act” along with the State’s power to appoint and remove all California Table Grape Commissioners.

This case is similar to Paramount and Delano. Under the MOUs, QSBCs must submit “for pre-approval” by the Secretary “any and all promotion, advertising, research, and consumer information plans and projects” and “any and all potential contracts or agreements to be entered into by QSBCs for the implementation and conduct of plans or projects funded by checkoff funds.” They must also submit “an annual budget outlining and explaining anticipated expenses and disbursements” and a “general description of the proposed promotion, research, consumer information, and industry information programs contemplated.” Failure to comply can lead to de-certification of the QSBCs by the Secretary. This establishes, as in the federal program, “final approval authority over every word used in every promotional campaign.” Johanns. Promotional campaigns by QSBCs and contracted third parties subject to the Secretary’s pre-approval are therefore plainly government speech.

Third-party speech not subject to pre-approval is also “effectively controlled” by the government. Congress expressly contemplated the participation of third parties in the checkoff program, designating several “established national nonprofit industry-governed organizations” with whom the Operating Committee could contract to “implement programs of promotion.” §2904(6). (Most of the 3rd-party funding goes to the Federal Division of the National Cattleman’s Beef Association and the US Meat Export Federation with established relationships with the Beef Board.) Johanns upheld that program despite recognizing the presence of “assistance from nongovernmental sources in developing” advertising. Paramount vacated a preliminary injunction despite the Pistachio Commission’s use of funds to pay “a political consultant who hires lawyers to represent the industry before the International Trade Commission and the Commerce Department, and to lobby government entities on behalf of the pistachio industry. We treated the 3rd-party speech as that of the Commission because the “message set out in the pistachio promotions is from beginning to end the message established by the state government.”

Here too the message is firmly established by the federal government. Inter alia, the Beef Act’s implementing regulations require that all 3rd-party speech “strengthen the beef industry’s position in the marketplace” and not mention “brand or trade” names, engage in “unfair or deceptive acts or practices,” or seek to influence “governmental policy or action.” 7 CFR 1260.169. R-CALF argues that such safeguards are insufficient because the government does not exercise final pre-approval authority over some 3rd-party speech. But Paramount found dispositive the government’s ability to control speech even when it declined to do so. The Secretary clearly has that authority here. A contrary holding here “risks micro-managing legislative and regulatory schemes, a task federal courts are ill-equipped to undertake.”

We therefore affirm Morris’s summary judgment. (Because we hold that the US effectively controls the speech at issue, we do not reach Defendants’ argument that the opt-out scheme cures any 1st Amendment concern.)

Hurwitz, Wardlaw, Tallman.

R-CALF v. Dept. of Agriculture and Intervenors Montana Beef Council et al, 20-35453, 7/27/21.

David Muraskin (Public Justice), DC, William Rossbach (Rossbach Law), Missoula, and Dudley Butler (Butler Farm & Ranch Law Group), Benton, Miss., for R-CALF; Lindsey Powell, Michael Raab, Ryan Majerus, and Stephen Vaden (Ag Dept.); Jean-Claude Andre (Bryan Cave Leighton Paisner), Santa Monica, Bryan Harrison (BCLP), DC, Robert Thompson & Mollie Harmon (BCLP), Kansas City, and Randy Cox (Boone Karlberg), Missoula, for Intervenors; Tyler Lobdell & Tarah Heinzen (Food & Water Watch), DC, for Amici Food & Water Watch et al.