Gone
In A Mushroom Cloud
By
Lee Pitts, Executive Editor, Livestock Market Digest
Whether
you like your beef with or without mushrooms, a recent decision
by the Supreme Court is going to leave a decidedly toadstool taste
in the collective mouth of the beef industry for a long time. In
upholding a previous ruling by the Sixth Circuit Court the Supremes
ruled the mushroom checkoff's advertising program violated the free
speech rights of mushroom growers. In doing so it struck down the
mushroom checkoff and opened the door to a challenge of the beef
and pork checkoffs.
A
Lot To Lose
In
a landmark 6 to 3 decision the Supreme Court ruled June 25th, in
the case titled United States vs. United Foods, that a mandatory
mushroom promotional campaign violated the First Amendment rights
of mushroom producers because it forced all mushroom handlers to
pay for generic advertising whether or not they agreed with the
message. United Foods had argued that the mandatory promotional
campaign forced it to pay for ads that also helped its competitors.
The Supreme Court agreed with United Foods and ruled against the
government and the checkoff.
In
writing the majority opinion Justice Kennedy wrote, "Just as the
first Amendment may prevent the government from prohibiting speech,
the amendment may prevent the government from compelling individuals
to express certain views." Four years ago in a case brought by tree
fruit growers Wileman and Elliott the Supreme Court ruled that the
forced tree fruit advertising program WAS constitutional. The Justices
made the important distinction in the United Foods case that tree
fruits are part of an overall regulated marketing program whereas
mushrooms are not.
"Most
of the funds at issue are used for generic advertising; and there
no marketing orders regulating mushroom production and sales, no
antitrust exemption, and nothing preventing individual producers
from making their own marketing decisions," wrote Stevens.
"Mushroom growers are not forced to associate as a group that
makes cooperative decisions."
The
same could be said of both pork and beef.
So,
it seems the only chance for beef and pork producers to save their
checkoffs is to convince the court that their industries have a
cooperative marketing program that is heavily regulated by the government.
Although the dairy people might be able to prove it, its a
hard stretch to make the same argument for beef. Despite protestations
to the contrary from the NCBA and the National Pork Producers Council,
this Supreme Court ruling may spell doom for most agricultural checkoff
programs. Although the CBB and NCBA may currently be in denial about
this prospect, the NCBA admitted as much in their friend-of-the-court
brief in siding with the government versus the mushroom growers.
The NCBA lawyers wrote that a decision in favor of United Foods
threatens the numerous other agricultural commodity programs established
pursuant to federal and state law, including the beef, soybean,
dairy and egg promotion programs.
The
importance of the mushroom case to other checkoff programs is evidenced
by the organizations that paid to file friend-of-the-court briefs
on behalf of the government and the USDA. Included in this group
are the American Mushroom Institute, the American Soybean Association,
the National Milk Producers Federation, the Milk Industry Foundation,
the United Egg Producers, the United Egg Association and NCBA. All
beneficiaries of current checkoff programs, by the way.
One
of the big winners in the case was the Western Organization of Resource
Councils who joined in a friend-of-the-court brief on behalf of
United Foods. John Smillie, WORC's Program Director, said that the
Supreme Court's decision "should provide a basis for challenging
the constitutionality of the beef and pork checkoff programs as
unconstitutional forced speech, because of the similarity of these
programs to the mushroom checkoff program."
The
Higher Court
United
Foods Inc. is a large agricultural enterprise based in Tennessee
that grows and distributes mushrooms. Until the recent Supreme Court
decision there had been a checkoff on mushrooms not to exceed 1
cent per lb of mushrooms produced or imported. The mushroom checkoff
was established, just like beef, with an Act and Order of Congress
and the assessments were earmarked for mushroom promotion, research,
consumer information and industry information.
United
Foods has refused to pay its mushroom checkoff assessments since
1996.
The
USDA and federal government responded to United Foods civil
disobedience by using the 1990 Act and Order which formed the Mushroom
Council and also authorizes the collection of checkoff money. The
USDA filed an action in the U.S. District Court for the Western
District of Tennessee seeking an order compelling United Foods to
pay up. United Foods refused to pay the checkoff because they had
been spending their own advertising and promotion dollars to convey
the message that its brand of mushrooms was superior to those generic
mushrooms grown by producers and advertised by the Mushroom Council.
It strongly objected to being charged for a message that devalued
its own mushrooms.
In
preliminary legal jostling an administrative law judge dismissed
United Foods petition and a judicial officer of the USDA concurred
that United Foods should be forced to pay its assessment. (This
has been a similar response to beef checkoff challenges.) However,
United foods did not let it drop. They appealed those decisions
in District Court and, they too, agreed that United Foods should
be forced to pay. With seemingly the last bullet in their gun, United
Foods appealed the District Court decision to the Sixth Circuit
Court, which finally ruled in their favor by reversing the earlier
decisions. This time it was the governments turn to appeal,
which they did to the U.S. Supreme Court. After all, the USDA knew
that if United Foods was allowed to win their case it threatened
all other checkoff programs which it oversees.
The
Supreme Court agreed to hear the case and after considering all
sides of the argument ruled that United Foods did NOT have to pay
the checkoff because it DID violate their First Amendment rights.
There can be no further appeals.
People
For The Ethical Treatment of Mushrooms
United
Foods argued forcefully that the checkoff assessment was a forced
subsidy for generic advertising and as such, violated their First
Amendment rights. In agreeing Justice Steven wrote: "The First
Amendment values are at serious risk if the government can compel
a citizen or group of citizens to subsidize speech on the side that
it favors." The majority of the court felt that the United Foods
case was different than the earlier Wileman-Elliott case in which
the justices ruled 5-4 that the tree fruit checkoffs were constitutional.
Wrote Stevens, "The California tree fruits were marketed under detailed
marketing orders that had displaced many aspects of independent
business activity."
Although
Justice Kennedy delivered the opinion of the court it was Justice
Scalia who probably put it in more understandable terms. During
the trial he asked the USDA to pretend he were a member of a fictitious
group called People For The Ethical Treatment of Mushrooms. And
that he, as a grower, enjoyed raising and selling mushrooms but
did not want people to eat the poor little creatures. How could
he be compelled, as a member of the People for the Ethical Treatment
of Mushrooms, to pay a fee to promote the eating mushrooms when
he disagreed with that? Likewise, why should a producer of natural
beef be forced to pay for generic beef ads when most of the beef
being advertised is produced in a way that producer does not agree
with?
So
What Does It Mean?
The
USDA and NCBA probably did not expect this outcome. Now, seemingly
they're only hope is to say that the beef industry is regulated
by the government so that it qualifies under the Wileman decision
instead of United Foods. In other words, they must prove that promotion
of beef is part of a government marketing program. How they square
this with previous comments that the CBB and NCBA are producer run
and producer driven organizations will make for some interesting
press releases.
Although
the Supreme Court mushroom decision does not, by itself, put an
end to the beef checkoff it is probably the beginning of the end.
Even if a voluntary program results, the NCBA with nearly 90% of
its budget coming from the mandatory checkoff, could vaporize in
a mushroom cloud.
After
the USDA ruled there were not enough valid signatures on the Livestock
Marketing Associations petitions for a referendum on the beef
checkoff the Cattlemen's Beef Board and the NCBA said in a press
release that the checkoff issue was now "behind them."
In reality, the battle for beef bucks is just now beginning.
There
are still two court cases that could have a big impact on how long
the NCBA can live in the comfort to which it has become accustomed.
Like United Foods, Steve and Jeanne Charter in Montana refused to
pay the beef checkoff to force the USDA to come after them. The
Charters vehemently objected to the NCBA merger and their arrogant
acts. The USDA did come after the Charters, and Steve and Jeanne
have spent nearly $25,000 holding them at bay. The judge in their
case said he wanted to wait until after the Supreme Court ruled
in the mushroom case before he made his decision in the Charters
case. Immediately following the Supreme Court decision in the mushroom
case the Charters lawyer was ready to seek an immediate dismissal
of their case, but the federal attorney prosecuting the Charters
asked them to delay their petition to dismiss for one week because
the USDA was holding extensive meetings on whether or not to throw
in the towel. We would be very surprised if that happens. The checkoffs
are USDAs baby. They get paid for administering them and often
point to the checkoffs as their version of what a good government
can do for farmers and ranchers. There are also some people who
believe USDAs support has been bought and paid for by special
interest groups represented by the checkoff boards themselves. One
of the big questions remaining is how much money the CBB, NCBA and
NPPC will be able to stuff in their sock before they are stopped
and before some judge demands that all future moneys be placed in
an escrow account. The Sheep Industry Association has remained in
business long after its checkoff was halted. The beef checkoff collects
close to $1.7 million per week or nearly $7 million per month. Assuming
they cant use the money for advertising and other causes with
free speech considerations, how will they spend the money? The other
white meats checkoff program was standing on wobbly legs anyway.
Given last fall's vote by producers to do away with the mandatory
pork checkoff, and the fact that the USDA is already under fire
from producer groups, and at least one lawsuit has already been
filed against USDA for arbitrarily disregarding the producer vote,
this Supreme Court decision could be the straw that breaks their
back.
The
Judges Arent Done Yet
In
view of a decision by Federal District Court Judge Charles Kornmann
in a suit brought by the Livestock Marketing Association, the Western
Organization of Resource Councils and three South Dakota producers,
the CBB and NCBA had better be very careful of any further producer
communications spinning this recent Supreme Court decision in their
favor. Judge Kornmann was sharply critical of the CBB and NCBA and
issued a preliminary injunction against any further producer communications
that are persuasive or political in nature. Kornmann decreed that
such industry information was done to "perpetuate the existence
of the CBB and the checkoff itself." He also said, "I
believe that these producer communications violate the Beef Promotion
and Research Act itself."
On
August 14th the LMA will be back in court in front of Judge Kornmann
who will now have the most recent Supreme Court decision to consider.
If
the USDA does not throw in the towel there will probably be a parade
of lawsuits and challenges to the beef checkoff at both national
and state levels. One argument checkoff supporters may use in a
desperate attempt to sway public opinion will be the depressing
effect the Supreme Courts decision could have on the beef
market. On the day the United Foods decision was announced
a beef market that had been drifting lower, ended higher. A day
later August live cattle made new yearly highs. Slapped on the wrist
by Judge Kornmann for their industry propaganda campaign, the NCBA
and CBB will have a difficult time swaying the court of public opinion.
Even if they do, that court wont matter because a higher court
has already had the last say.
Mushrooms
can be grown by throwing them manure and keeping them in the dark.
As the implications of this Supreme Court decision sink in it will
become more difficult for checkoff organizations to treat their
producers in the same manner.
This
article originally appeared in the July 15, 2001 edition of Livestock
Market Digest and was reprinted with permission from its author.
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