Gallo Cattle Company, a California Limited Partnership v. California Milk Advisory Board Ann M. Veneman, in Her Official Capacity as the Secretary of the California Department of Food and Agriculture State of California
Docket: 97-17182
Court: Court of Appeals for the Ninth Circuit; July 14, 1999; Federal Appellate Court
Gallo Cattle Company, a California Limited Partnership, appealed a summary judgment in favor of the California Milk Advisory Board (CMAB), Ann M. Veneman, Secretary of the California Department of Food and Agriculture, and the State of California, arguing that CMAB’s compulsory assessments for promoting California milk and dairy products violated its First Amendment rights. The appeal followed the district court's ruling, and the Ninth Circuit affirmed the decision.
The California Marketing Act of 1937 was established to enhance marketing efficiency and promote commodities grown in California. Under this Act, the Secretary of the Department of Food and Agriculture is empowered to issue marketing orders regulating the marketing and processing of these commodities. The Milk Marketing Order, created to support the marketing of milk and dairy products, allows CMAB to conduct research, education, advertising, and promotional activities, funded by an assessment of $0.10 per hundredweight on milk produced by designated producers, including Gallo. As a producer-handler, Gallo is required to pay this assessment on its raw milk production.
CMAB has implemented a promotional program aimed at boosting the demand for milk and dairy products produced from California raw milk, utilizing advertising, merchandising, public relations, education, and research. A significant portion of CMAB's budget is allocated to promoting products such as fluid milk, cream, butter, cottage cheese, yogurt, cheese, and ice cream. In the early 1980s, CMAB initiated a task force to develop California's cheese industry, recognizing that most cheese sold in the state was imported. This led to the creation of the Real California Cheese® seal, which CMAB licenses at no cost to manufacturers, provided their cheese is made from California milk, contains no preservatives, and meets quality standards. CMAB promotes consumer demand for cheese bearing this seal through various advertising and promotional efforts, with the goal of encouraging cheese manufacturers and retailers to source California raw milk, thereby benefiting local dairy farmers.
In a related legal matter, Gallo filed a complaint against CMAB and state officials, asserting that CMAB's mandatory assessments infringe on its First Amendment rights. Gallo sought a refund of past assessments and a preliminary injunction to escrow future assessments. The district court granted partial summary judgment, dismissing the State of California and CMAB based on Eleventh Amendment immunity and striking Gallo's request for retroactive relief against the Secretary in her official capacity, while allowing the suit to proceed against her in that capacity. A preliminary injunction was issued to prevent the Secretary from utilizing Gallo's unpaid assessments. Following a motion to dissolve this injunction, the district court granted it but stayed the order pending a U.S. Supreme Court ruling in Glickman v. Wileman Bros. Gallo appealed, and the appellate court stayed the dissolution order. After the Supreme Court's decision, the district court granted summary judgment for the Secretary, deeming the Wileman ruling conclusive for Gallo's claims, leading to Gallo's timely appeal.
The district court's grant of summary judgment is reviewed de novo, focusing on whether there are genuine issues of material fact and if the law was correctly applied. The primary issue is whether the district court erred in ruling that the Supreme Court's decision in Wileman was decisive regarding Gallo's First Amendment challenge to the California Milk Advisory Board's (CMAB) mandatory assessment for promoting milk and dairy products. In Wileman, the Supreme Court upheld the mandatory assessments on California tree fruit growers against a First Amendment challenge, noting they funded generic advertising for nectarines, plums, and peaches. The Court emphasized the Agricultural Marketing Agreement Act of 1937's role in establishing orderly marketing and fair prices for agricultural commodities, asserting that marketing orders are a type of economic regulation exempt from antitrust laws. These orders control commodity quality, quantity, and pricing, and permit promotional activities that serve producers' collective interests.
The Supreme Court assessed whether the marketing orders infringed on producers' First Amendment rights using a three-part test: (1) they must not restrict producers' communication freedom; (2) they must not compel speech; and (3) they must not force producers to endorse non-germane views. The Court concluded the marketing orders did not restrict communication, rejecting the argument that assessments limiting advertising budgets constituted a speech restriction, clarifying that the First Amendment does not require heightened scrutiny for economic regulations with incidental effects on advertising budgets.
The Court analyzed whether a marketing order imposed 'compelled speech' on producers, ultimately rejecting their argument that mandatory assessments for advertising constituted such speech. The Court clarified that the assessments do not require producers to voice an objectionable message or associate with an antagonistic ideology; rather, they merely entail financial contributions for advertising. While the marketing order compels financial contributions, it does not equate to compelled speech under the First Amendment, which prohibits forcing individuals to financially support others' speech without sufficient justification. However, the Court acknowledged that mandatory funding for collective programs may be permissible if the speech funded is 'germane' to the program's objectives.
In this case, the generic advertising for California peaches and nectarines was deemed germane to the marketing order's purposes, and the assessments were not used for ideological activities. The Court emphasized that compelled funding should be assessed under the 'germaneness' test rather than commercial speech regulations. The analysis concluded that economic regulations like this should be presumed valid, and the objections of a minority of producers do not outweigh the majority's interest in beneficial programs.
To assess the claims made by Gallo, the same analytical steps from the Wileman case will be applied, starting with the examination of the statutory scheme. Gallo acknowledged that California milk producers face similar regulations as the tree fruit growers in Wileman, with promotional activities aimed at serving common interests in selling their products. Consequently, dairy farmers are compelled to fund generic advertising as part of their collective regulatory environment, thereby satisfying the first analytical step in Wileman.
Wileman's three-part test is employed to assess whether the Marketing Order infringes on Gallo's First Amendment rights or is merely a component of an economic regulatory scheme. The test evaluates: (a) if the Marketing Order restricts Gallo's freedom to communicate; (b) if it compels Gallo to engage in any form of speech; and (c) if it forces Gallo to fund ideological messages that are not relevant to the purposes of the Marketing Order.
1. **Restraint on Communication**: The Marketing Order does not restrict Gallo’s ability to communicate or advertise freely. Although it may limit Gallo's advertising budget indirectly, this does not constitute a restriction on speech.
2. **Compelled Speech**: The Marketing Order does not compel Gallo to perform any specific speech acts. Gallo’s use of the Real California Cheese(R) seal is voluntary, and while assessments are mandatory, funding collective advertising is not viewed as compelled speech.
3. **Financing Non-Germane Ideologies**: Although the Marketing Order requires Gallo to finance certain messages it finds objectionable, these messages are deemed 'germane' to the objectives of the Marketing Act. Gallo’s objections focus on the perceived ideological nature of CMAB's advertising, which it describes as corny and misleading regarding product quality. Despite Gallo's concerns, the court suggests that these ads are unlikely to be interpreted as having significant ideological implications.
In summary, the court holds that the Marketing Order does not violate Gallo's First Amendment rights, as it does not impose restrictions on communication, does not compel speech, and the funded messages are relevant to the regulatory purpose.
Compelled association of California milk producers aligns with objectives of the California Marketing Act and Marketing Order, aimed at preventing economic waste, enhancing marketing efficiency, and maintaining and expanding markets for state-grown commodities. The Marketing Order specifies that promotional activities seek to sustain existing markets and develop new ones for California milk and dairy products. The California Milk Advisory Board's (CMAB) generic advertising, including for Real California Cheese(R), is relevant to these goals. Generic advertising is designed to boost consumer demand in regulated markets, creating a significant increase in demand for California milk as cheese demand rises. Gallo's objection to the implication that all cheese with the Real California Cheese(R) seal meets high-quality standards lacks evidence and is likely unfounded. Compliance with stringent quality standards is required for cheese to carry this seal, including being natural, preservative-free, and produced entirely within California. There is no indication that manufacturers are misusing the seal, supporting the assumption that such cheese is of high quality. The Real California Cheese(R) advertising campaign aims to boost overall consumption of California raw milk by increasing cheese demand, furthering the objectives of the Marketing Act and Marketing Order. Consequently, CMAB can utilize Gallo's assessments for funding this generic advertisement despite Gallo's objections.
CMAB is accused by Gallo of exceeding its authority under the Marketing Order by permitting 'branded' or 'private label' cheese to use the Real California Cheese seal, promoting all seal-bearing cheese as a generic product, and including branded cheese in its advertisements. However, the determination of whether CMAB's actions violate the Marketing Order, federal regulations, or state law is not pertinent to the main issue at hand: whether Gallo's mandatory assessment for generic milk and dairy product advertising infringes on its First Amendment rights. Any potential validity to Gallo's complaints pertains to the administration of the program and should be directed to the Secretary, as they do not affect the overall program's legitimacy. The Marketing Order is classified as an economic regulation that does not violate Gallo's First Amendment rights, leading to the affirmation of the district court's summary judgment in favor of the Secretary.
The California Milk Advisory Board (CMAB) represents approximately 2,200 dairy farmers and is comprised of twenty-five members, with twenty-four being producers or producer-handlers of raw market milk. The Milk Marketing Order defines key terms: "producer" as someone engaged in producing market milk, "handler" as someone who acquires milk for processing, and "producer-handler" as someone who both produces and processes milk. A certification mark is a federally recognized trademark indicating that a product meets specific standards.
The economic dynamics favor milk producers, who benefit significantly from cheese production, requiring ten pounds of raw milk for each pound of cheese. Gallo's petition for rehearing claims that no admission regarding regulatory comparisons to the fruit industry was made, despite counsel acknowledging that raw milk is heavily regulated but not under the specific marketing order in question. The court's focus is on the broader regulatory framework rather than a single marketing order, aligning with the precedent set in Wileman, which emphasized the overall regulatory context affecting producers.
The present case is differentiated from commercial speech limitations in previous cases, where complete advertising bans were struck down. The court stresses that the constraints on milk producers' independence arise from a comprehensive regulatory scheme, similar to the context considered in Wileman.
The Real California Cheese seal is characterized as voluntary, distinguishing it from cases of compelled speech, such as Riley v. National Federation of the Blind and Wooley v. Maynard, which involved mandatory disclosures and display of state mottos, respectively. Gallo provided examples of humorous promotional statements about cheese in California, including questions about regional sentiments and notable visits by political figures during events like the Olympics. Additionally, Gallo asserted that some promotional activities by the California Milk Advisory Board (CMAB) favor specific branded or private label cheeses, which raises concerns about program administration but does not invalidate the entire initiative. The district court's summary judgment was upheld, negating the need to address Gallo's other claims regarding the preliminary injunction and the immunity of CMAB and the State of California under the Eleventh Amendment.
