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Commodity Promotion Programs Win a Squeaker: Supreme Court Reverses 9th Circuit

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NEC-63 2002 Next Meeting Date xx-yy, 2002 Albuquerque, New Mexico Title

Commodity Promotion Programs Win a Squeaker:
Supreme Court Reverses Ninth Circuit in Glickman v. Wileman

by Richard T. Rossier and Wayne Watkinson

In a 5-4 decision handed down on June 25, 1997, the United States Supreme Court upheld the constitutionality of federally-required funding of commodity promotion programs. In doing so, it reversed the Ninth Circuit’s 1995 decision that declared these programs violated the First Amendment rights of the producers funding them. Justice John Paul Stevens, writing for the majority in Glickman v. Wileman Brothers, stated the law requiring producers to fund generic commodity advertising of their crops was not a law “abridging the freedom of speech” within the meaning of the First Amendment. Justice Stevens was joined in the majority by Justices Sandra Day O’Connor, Anthony Kennedy, Ruth Bader Ginsburg, and Stephen Breyer. Justice David Souter dissented, joined by Chief Justice William Rehnquist, and Justices Antonin Scalia and Clarence Thomas.

In this article, we address four questions that have been asked concerning this significant and long-anticipated Supreme Court decision — one of the most significant Court decisions in the agricultural area in many years. The four questions are:

1. What was at issue in the case?
2. What did the Supreme Court actually decide?
3. What does the decision mean for all the other state and federal checkoff programs that were not actual parties in the case?
4. What are the implications for future activities and issues likely to be raised by challengers, and for future activities and issues of the commodity promotion boards?

Question One: What Was at Issue in Wileman?

Factual Background

As you may already know, the Wileman case arose under the Agricultural Marketing Agreement Act of 1937 (“AMAA”). The AMAA, a comprehensive, federal, depression-era law, provided a number of mechanisms for various fruit and vegetable industries to assist in stabilizing their markets and increasing returns to producers. The particular part of this law at issue in Wileman was actually added to the statute in 1954; it authorized commodity boards to fund generic advertising of the covered commodity.

The case began with an administrative petition filed at USDA ten years ago that challenged such aspects as the fruit maturity requirements of marketing orders for California peaches and nectarines. The original petition was later amended with the addition of a First Amendment challenge. It was only the First Amendment part of the case that made it all the way to the Supreme Court.

Legal History

After various administrative and lower court decisions, in the summer of 1995 the Ninth Circuit handed down a decision that rejected all of the challengers’ arguments except their claims that forced funding of generic advertising violated their First Amendment free speech rights. In striking down these California tree fruit marketing orders, the Ninth Circuit held that “[t]he First Amendment right of freedom of speech includes a right not to be compelled to render financial support for others’ speech.”

The Ninth Circuit then applied the so-called Central Hudson test which asks three questions: (1) Does the program involve a substantial government interest? (2) Does the government program directly advance that interest? and (3) Is the program narrowly tailored to minimize any adverse impact on First Amendment rights? The Ninth Circuit ruled the tree fruit orders failed prongs 2 and 3 of the test, thus the marketing orders were unconstitutional.

While the Ninth Circuit acknowledged the program served a substantial state interest, saying the generic advertising program for California peaches and nectarines had increased peach and nectarine sales, it ruled that “the question is not whether the generic advertising program has increased peach and nectarine sales ....” Rather, the Court said, the Constitutional inquiry is a much more narrow and focused one: Does the mandatory generic advertising program “sell the product more effectively” than the specific, targeted efforts of individual handlers the Ninth Circuit assumed would take place in the absence of a mandatory program (emphasis added)? Because the USDA had not proved so, it held the program failed prong 2 (the “directly advance” prong) of the test. Furthermore, because the program did not offer the option of having the advertising component of the assessment reduced by offering credit for qualified brand advertising, the Ninth Circuit also held the programs violated prong 3 (the “narrowly tailored” prong).

Recognizing the potential adverse ramifications of this decision on all state and federal mandatory commodity promotion programs, the government appealed to the Supreme Court and the case was argued last December. In requesting that the Court hear the case, the government pointed out that the reasoning and result in Wileman conflicted with the reasoning and result of a 1989 decision called United States v. Frame, which had rejected a First Amendment challenge to the Beef Promotion Act.

Survival of Mandatory Commodity Promotion Programs Was at Issue

Ultimately, then, what was at issue in this case was whether any of these programs — arising under the AMAA or under commodity-specific, freestanding laws like those for beef, dairy, pork, and soybeans (whether authorized by Congress or by various state legislatures) — would survive the Supreme Court’s decision and analysis. While the marketing orders at issue in the case were small, there was recognition by both the challengers and the supporters of these programs that the impact of the decision would reach well beyond California tree fruit.

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Question Two: What did the Supreme Court Actually Decide?

General Summary

What the Court decided was that both the Ninth Circuit’s analysis and the result of that analysis were wrong. The Court therefore reversed the result and held California tree fruit marketing orders were constitutional, and that they did not violate the First Amendment. Significantly, the Court also held that the wrong test was applied by the Ninth Circuit. It held that the correct test was not Central Hudson, but rather a test developed in a case called Abood v. Detroit Board of Education. This new test, a very deferential one, simply requires: (1) funds spent on promotion be germane to statutory goals, and (2) assessments cannot be compelled to fund non-germane, ideological advertising. Because neither of these requirements had been violated, the Court declared the California tree fruit marketing orders constitutional.

The Stevens Majority

Writing for the slim five-justice majority, Justice John Paul Stevens said that in accordance with the Agricultural Marketing Agreement Act (“AMAA”), business entities are required to fund generic advertising as part of a broader federal program that limits the freedom of individuals to act independently. Recognizing producers’ collective promotional activities were intended to serve the producers’ common interests in selling their crops on favorable terms, Justice Stevens saw the legal question presented by the case as a simple one. The question was whether being required to fund advertising raised a First Amendment issue or, rather, does such a requirement simply raise a straightforward question of economic policy for Congress and the USDA to decide? The Court majority found no First Amendment interest of the objecting producers that merited an increased judicial scrutiny of the law. Thus, the Court held, the law’s mandatory promotion funding component was constitutional.

The Supreme Court majority also pointed out how the three characteristics of generic commodity promotion law distinguish it from laws the Supreme Court had declared violate the First Amendment:

• Marketing orders do not prohibit or restrain anyone from speaking to anyone. Producers remain just as free as they were to say whatever they want about their crops, the USDA-supervised promotions, or anything else.
• Marketing orders do not force producers to speak or engage in “symbolic” speech at all. Indeed, it is not the individual producer doing the talking, it is the commodity board.
  
• Marketing orders do not require producers to endorse or finance any political or ideological views since the messages funded by commodity boards are non-ideological messages encouraging consumers to eat more of the commodity the producer has chosen to produce, in this case, more peaches and/or nectarines.

The Supreme Court also rejected the argument that First Amendment rights were violated because generic promotion fees limit the funds producers have available to engage in their own advertising. The First Amendment has never been read to require that a law be declared unconstitutional simply because it had the unintended and incidental effect of limiting the size of one’s advertising budget. The Court also noted the First Amendment was not violated because the use of fees to pay for generic advertising did not require producers to repeat the generic messages themselves nor require them to be publicly identified with the generic messages of the commodity boards. The advertising messages did not say that any individual producers was funding the ad or making the statements in the ad — rather, the ad was stated to come from “the California Tree Fruit Agreement” or from “California Summer Fruits.” In short, the majority held, requiring producers to pay assessments for advertising does not create a crisis of conscience in producers assessed to pay for these advertisements, since the advertising is for a commodity they have chosen to produce and sell. Simply because a group of producers believe their money is not being well spent does not transform a rather basic policy disagreement into a First Amendment violation.

The Court held that the applicable constitutional test is the one set forth in Abood v. Detroit Board of Education, which stated mandatory funding of labor unions was constitutional so long as there was no funding of ideological messages unrelated to the collective bargaining activities of the union. The Abood test merely requires: (1) funding be of activity germane to the law’s goals, and (2) funds are not to be used to support ideological activities unrelated to the law’s goals. The Court held the Abood test was “clearly satisfied” in Wileman because: (1) the generic advertising of California peaches and nectarines was unquestionably germane to the law’s purposes, and (2) the assessments were not used to fund ideological activities.

The Stevens majority also criticized the Ninth Circuit’s test requiring comparison of the effectiveness of the generic promotion program with the promotion efforts of individual producers. The Court said, “We find this an odd burden of proof to assign to the administrator of marketing orders that reflect a policy of displacing unrestrained competition with government-supervised cooperative marketing efforts.... Potential benefits of individual advertising do not bear on the question of whether generic advertising directly advances the statute’s collectivist goals.” The majority also noted that it was “illogical” to criticize any cooperative program authorized by Congress on the grounds that competition would provide greater benefits than joint action. The statute reflects the policy judgment of Congress of volatile agriculture markets being best served by requiring some cooperative action. Judges should not strike down laws simply because they disagree with policy decisions made by Congress. That one or more producers would prefer not to fund generic advertising is not a sufficient reason for overriding the “judgment of the majority of market participants, bureaucrats, and legislators who have concluded that such programs are beneficial.”

Justice Souter’s Ringing Dissent

Justice David Souter dissented by arguing the First Amendment should be read to include a right to be free from coerced subsidization of commercial speech. The majority, he said, has misread the Abood decision. First, he stated, Abood does not permit any mandatory assessment to be upheld just because it is germane to a permissible economic regulation and does not require funding of ideological speech. Rather, he argued, Abood stands for the proposition that being compelled to fund commercial speech infringes the First Amendment just as much as being prohibited from funding commercial speech. The four-justice minority would have affirmed the Ninth Circuit’s decision striking down the mandatory generic advertising program on First Amendment grounds.

Justice Souter continued in his dissenting argument that the majority had not only misread, but had also misapplied the Court’s Abood decision. That case, he claimed, requires not only that mandatory fees be germane to some legitimate statutory scheme, it also requires the mandatory fee to be justified by vital policy interests of the government, and not add significantly to the burdening of free speech inherent in achieving those interests. Because the commodity promotion program being challenged did not further “vital policy interests of the government,” he argued, the Abood test should not have been applied.

Rather, Justice Souter and the other dissenters would have applied the Central Hudson test (the same one the Ninth Circuit had applied), but they would have failed the marketing orders on all three prongs, including prong 1 of the test — the “substantial government interest” prong. Justice Souter appeared to be particularly troubled by the localized, state-by-state nature of marketing orders under the AMAA. He did not see, for example, a substantial governmental interest in promoting only California peaches, but not Georgia peaches. For this reason, he would fail the challenged marketing orders on prong 1 of the Central Hudson test. He did say, however, that if the “government were to attack these problems across an interstate market for a given agricultural commodity or group of them, the substantiality of the national interest would not be open to apparent question.”

Even Justice Souter, however, was somewhat uncomfortable with the Ninth Circuit’s reading of prong 2 of the Central Hudson test — the “directly advance” prong. Thus, Justice Souter would not require a comparison of how effective the generic promotion efforts were with the effectiveness of the challengers’ individual advertising efforts. Rather, Justice Souter would require the government to show that the collective advertising program “appreciably increases the total amount of advertising for a commodity or somehow does a better job of sparking the right level of consumer demand than a wholly voluntary system would.”

Concerning prong 3 (the “narrow tailoring” requirement), Justice Souter suggested that, generally, to pass muster, these programs must offer some sort of individual or brand advertising credit, although he understands the commodity board must be permitted some significant leeway in fashioning the credit program so such a system does not serve to undermine the effectiveness of the generic advertising effort, and so that credit programs help to further the objective of expanding markets generally.

Justice Souter also argued that while the Central Hudson test does not impose a heavy burden on the government to justify its programs, it does require a showing greater than mere “plausibility.” The required showing, he claimed, had not been made in the case before the Court.

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Question Three: What does the Supreme Court’s Wileman Decision Mean for Other Checkoff Programs that Were not Parties?

The Challengers Have Not Folded Their Tents

The challengers who have opposed mandatory promotion programs for years are not likely to simply fade away just because they lost a major case in the Supreme Court. Evidence of this was presented only seven days after Wileman was handed down. Donald B. Mills, Inc., a mushroom grower, challenged the constitutionality of the Mushroom Promotion Act on First Amendment and Equal Protection grounds, filing on July 2 a rather interesting document with the USDA. That document, submitted by Mills’ lawyer, outlined the reasons why he thinks Wileman is not a legally binding precedent that the USDA is required to follow in this pending case.

While Mills had previously argued the USDA had to follow the Ninth Circuit’s Wileman decision as binding precedent, now that the Supreme Court has reversed the Ninth Circuit, Mills apparently sees no inconsistency in now arguing Wileman has become essentially irrelevant to the case. In the July 2 filing, Mills argues Wileman is only applicable to the AMAA because the comprehensive nature of that law was, he says, crucial to the Court’s decision. In contrast, he says, the Mushroom Promotion Act has only one very limited regulation, to collect money with which to promote mushrooms. Because mushrooms are not sold in a regulated market like California peaches are, he contends, Wileman is factually distinguishable from this case. Mills also tried to put some distance between the two cases by arguing that while the Supreme Court saw no disagreements by the producers with the promotion board’s messages in Wileman, here, he said, Mills has substantial problems with the messages of the Mushroom Council.

While these are certainly clever and creative arguments, Mills’ cramped reading of the Supreme Court’s Wileman decision strikes us as placing far too severe a restraint on the precedential value of the Court’s June 25 ruling. Indeed, the Judicial Officer of the USDA recently concurred with this point of view when he rejected, on August 27, 1997, Mills’ arguments for distinguishing the Wileman Supreme Court precedent. While the Judicial Officer acknowledged the obvious differences between the AMAA and the Mushroom Promotion Act being challenged by Mills, he found Wileman to be controlling law. This was because, he said, the three key factors identified by the Supreme Court as being key to its decision in Wileman were factors the AMAA had in common with the Mushroom Promotion Act. Specifically, the Judicial Officer found:

• The Wileman marketing orders and the mushroom promotion order do not restrain any producer from communicating any message to any audience.
• The Wileman marketing orders and the mushroom promotion order do not compel any person to engage in any actual or symbolic speech.
• The Wileman marketing orders and the mushroom promotion order do not compel producers to endorse or finance any political or ideological views.

As a result, the Judicial Officer found the Supreme Court’s decision in Wileman to be “dispositive of the First Amendment issue in this proceeding.” Moreover, he stated the differences between the regulatory scheme of the AMAA and the Mushroom Promotion Act were “not relevant to Petitioner’s First Amendment challenge.”

We Have Not Yet Seen the End of First Amendment Challenges

While time will surely answer this question, in our considered opinion the Supreme Court in Wileman endorsed the broad principle that the First Amendment does not preclude Congress from enacting an economic regulation of agriculture it has determined is needed, where the regulation’s impact on free speech rights are no greater than those described in Wileman. The significant battlegrounds in the immediate future will likely be the freestanding, commodity-specific programs at the federal and state level.

As we have already seen in connection with the Mushroom Promotion Act challenge, the future challengers will try to convince the courts that stand-alone promotion programs such as those for beef, dairy, pork, and others are so different from the AMAA marketing orders that the Ninth Circuit’s Wileman analysis should be followed, not the Supreme Court’s. All these arguments, however, ignore the significant fact that the Court was resolving a conflict in the circuits between the Third Circuit in Frame and the Ninth Circuit in Wileman. Frame, of course, involved a stand-alone program — the one for beef. Thus, the majority opinion makes clear that while there may be differences between the AMAA and stand-alone statutes, the same analysis adopted and applied in Wileman will govern.

It will likely take some time for this issue to be resolved by the courts. In this regard, we suggest you keep your eye on a case called Goetz v. Glickman, a Beef Promotion Act challenge currently pending before the Tenth Circuit. The trial court in that case followed Frame and rejected the challenger’s First Amendment arguments. Recently, the Tenth Circuit asked the parties to brief the implications of the Wileman decision. Oral argument in that case (originally scheduled for October 1996, but deferred pending the Supreme Court’s resolution of Wileman) is currently scheduled to take place on September 9, 1997, in Denver. How the Tenth Circuit resolves the First Amendment issue in Goetz should be a barometer for how courts across the country will handle the issue. The Tenth Circuit’s decision in the Goetz case is likely to be handed down by the end of the year.

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Question Four: What are Wileman’s Implications for the Future?

We have three predictions (guesses, really) concerning what the future holds for state and federal mandatory funding of agricultural commodity promotion programs:

• Over the Next Few Years, the Challengers Will See First Amendment Challenges Will Not Prevail in Court. As a result, they will be actively looking elsewhere for aspects of these programs to challenge in court.
  
• While Nature Abhors a Vacuum, so do Marketing Order Challengers. While the Supreme Court’s decisive Wileman decision is now the law of the land, commodity promotion opponents may continue to file First Amendment challenges so long as they think they have found programs whose advertising constitutes ideological advocacy. The boards, and government supervisors of the boards, are therefore well advised to remain vigilant and make sure all advertising and advertising campaigns scrupulously avoid anything that looks like an issue or political advocacies.
  
• Non-First Amendment Challenges Will be Filed. Assuming as we are that the First Amendment avenue of attack has now been effectively closed to the challengers, they are likely to now redouble their efforts to scrutinize boards, government supervisors, and activities that will provide the basis for any claim the enabling statute has been violated. Thus, now more than ever, commodity boards must carefully administer their programs to steer well clear of any situation where the challengers will have a factual basis for claiming the board violated the enabling statute or any other applicable legal requirement. Indeed, we understand a federal district court judge recently rejected a First Amendment challenge to the California Cut Flower Commission’s promotion program based on Wileman but has permitted the case to continue against the Commission based on claims assessments were improperly used by the Commission for lobbying activities. This kind of legal (but non-constitutional) challenge may represent the wave of the future.

Conclusion

The Supreme Court’s historic Wileman decision is now the law of the land. While commodity promotion opponents have not simply packed up their bags and gone home, their First Amendment challenges to promotion programs under the AMAA or under commodity-specific promotion statues are now likely to be uniformly rejected by the courts. Only if challengers can show the promotions involve clear ideological advocacy, do they have any chance of success. Because these programs are closely supervised by the USDA and by state governments, however, a successful First Amendment challenge to a commodity promotion program will likely become a thing of the past, a historic relic. Justice Stevens and the Supreme Court majority through their broad and sweeping opinion have, we think, clearly settled this question for some time.

Five years from now you may be hearing about the newest legal challenges to these programs. We cannot tell you exactly what kind of challenges they will be. We would certainly suggest, however, that commodity boards and their government supervisors maintain their vigilance to their programs and to the law. Wileman represents the closing of one legal chapter, albeit a significant one, in the pitched battles being waged over these programs. With one chapter closed, however, a new chapter will inevitably be opened. Time will judge whether this new chapter will be any more successful than the one just past.

Richard T. Rossier and Wayne R. Watkinson, of McLeod, Watkinson, & Miller, represent various federal and state commodity promotion entities created by law. They were coauthors, along with John G. Roberts, Jr. of Hogan & Hartson, of an amici curiae brief filed with the Supreme Court in Glickman v. Wileman Brothers seeking reversal of the Ninth Circuit’s decision.

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