|
CONTENTS
Federal Mushroom Promotion Act Delared
Unconstitional
Generic Milk Advertising in New York State
Editor's Notes
Next Meeting
NEC-63
Spring 2000
April 3-4, 2000
Evaluating Export Promotion Programs:
Turning Barriers into Opportunities?
Downtown Denver Embassy Suites Hotel
|
NEC-63
Fall 2000
October 2-3, 2000
New Product Innovations Center
Portland, Oregon
|
|
Federal Mushroom Promotion Act Declared Unconstitutional
Sixth Circuit Decision Threatens Other Promotion Programs
by Wayne Watkinson & Richard Rossiter,
McLeod, Watkinson & Miller*
In late 1999, the U.S. Court of Appeals for the Sixth Circuit struck
down the Mushroom Promotion Act of 1990 as a violation the First Amendment
to the United States Constitution. United Foods, Inc. v. United States.
This was the first appellate decision to significantly restrict the reach
of the Supreme Court’s 1997 decision in Glickman v. Wileman that
decided that commodity promotion laws do not violate the First Amendment.
In late March, 2000, the entire Sixth Circuit refused the government’s
request to reconsider its United Foods decision. Now, it appears, another
Supreme Court ruling analyzing the constitutionality of commodity promotion
laws may soon be upon us.
In deciding the United Foods case, the Sixth Circuit sought to distinguish
the facts of United Foods from those underlying the United States Supreme
Court’s 1997 decision in Glickman v. Wileman Bros. & Elliott,
Inc., in which the Court held that the California tree fruit promotion
program did not violate the First Amendment. Many saw the Sixth Circuit’s
effort to distinguish Wileman as unpersuasive. Indeed, the government
sought to have the entire Sixth Circuit reconsider the matter in part
because it believed the Sixth Circuit panel’s effort to distinguish
Wileman to be singularly unavailing. On March 23, 2000, the Sixth Circuit
turned down that request for rehearing, leaving the Sixth Circuit decision
in United Foods one of the most potentially significant decisions in this
area since the Supreme Court decided Wileman in 1997.
The Supreme Court’s Decision in Wileman
To understand the importance of United Foods, one needs to understand
what the Supreme Court decided in 1997 in Wileman. In a 5-4 decision handed
down on June 25, 1997, the United States Supreme Court in Wileman upheld
the constitutionality of federally-required funding of commodity promotion
programs. In doing so, it reversed the Ninth Circuit’s 1995 decision
that declared that these programs violate the First Amendment rights of
the producers that fund them. Justice John Paul Stevens, writing for the
majority in Wileman, stated that the law requiring that producers fund
generic commodity advertising of their crops is 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.
Wileman arose under the Agricultural Marketing Agreement Act of 1937
(“AMAA”). The AMAA is a comprehensive federal depression-era
law that provided a number of mechanisms for various fruit and vegetable
industries to use to assist in stabilize their markets and increase the
returns to producers. In the summer of 1995 the Ninth Circuit ruled that
the compelled funding of generic advertising violated the First Amendment
free speech rights of those compelled to fund these advertisements. 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 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 that the tree fruit orders failed
prong two and prong thee of the test and thus held that the marketing
orders were unconstitutional.
While the Ninth Circuit acknowledged that the program served a substantial
state interest, and it said that 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 that the Ninth Circuit assumed would take place in the absence
of a mandatory program. (Emphasis added). Because the USDA had not proved
that it did, it held that the program failed Prong 2 (the “directly
advance” prong) of t he test. Furthermore, because the program did
not offer the option of having the advertising component o f the assessment
reduced by offering credit for qualified brand advertising, the Ninth
Circuit also held that 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. In requesting that the Court hear the case
the government pointed out that the reasoning and the result in Wileman
conflicted with the reasoning and result of a 1989 decision called United
States v. Frame, that had rejected a First Amendment challenge to the
Beef Promotion Act.
In Wileman the Supreme Court decided that the USDA’s California
Tree Fruit regulations (called “marketing orders”) were constitutional
and they did not violate the First Amendment. The Court held that the
wrong test was applied by the Ninth Circuit — the correct test was
not Central Hudson but rather a test developed in a case called Abood
v. Detroit Board of Education. That new test, a very deferential test,
simply requires that (1) the funds spent on promotion be germane to statutory
goals and (2) that assessments could not be compelled to fund non-germane
and ideological advertising. Because neither of these requirements had
been violated, the Court declared the California tree fruit marketing
orders constitutional.
Writing for the five-justice majority in Wileman, 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 that the producers’ collective
promotional activities were intended to serve the producers’ common
interests in selling their crops on favorable terms, Justice Stevens saw
that the legal question presented by the case was a simple one. The question
was whether being required to fund advertising raises a First Amendment
issue or rather does such a requirement simply raise a straight-forward
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 is constitutional.
The Supreme Court majority also pointed out that three characteristics
of the generic commodity promotion law distinguish it from laws that the
Supreme Court has 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 to 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 nectarines.
Justice David Souter dissented and argued that 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.
United Foods
Since Wileman was decided in June 1997, every federal appellate court
presented with the issue except for the Sixth Circuit in United Foods,
had applied Wileman and upheld the constitutionality of the challenged
federal commodity promotion law. In United Foods, Judge Merritt, writing
for a three-judge panel of the Sixth Circuit, rejected the government’s
argument that the degree of regulation of an industry should play no role
in determining whether a program that required an industry to fund generic
advertising violated the First Amendment. He interpreted the Supreme Court’s
Wileman decision as requiring the satisfaction of two factors before a
mandated collection for advertising can be deemed consistent with the
requirements of the First Amendment. First, the advertising program must
be germane to a valid, comprehensive regulatory scheme, and second, the
content of the advertising must be nonideological. While he found that
the content was nonideological, he also found that the promotion program
was not part of a comprehensive regulatory program. Because of this, he
ruled that the Mushroom Promotion Act violated the First Amendment.
United Foods is the first appellate decision since Wileman that significantly
restricts the reach of Wileman. Up until now it has been widely understood
that the Wileman holding applied to promotion programs put in place as
part of comprehensive regulatory schemes such as marketing orders and
promotion programs that were stand-alone research and promotion acts and
orders. Many stand-alone programs will likely have renewed concerns as
the result of this ruling.
Several grounds for seeking a reversal of this decision by obtaining
a review of the decision by the Supreme Court are evident. One possible
ground for reversal is that the decision seems to be at odds with the
1998 decision in Goetz v. Glickman, in which the Tenth Circuit upheld
the constitutionality of the Beef Promotion Act in the face of a First
Amendment challenge. The Supreme Court later rejected the challenger’s
efforts to have that Court review the Tenth Circuit’s decision. In
addition, the Sixth Circuit decision gives short shrift to the Supreme
Court’s statements in Wileman in which the Court indicated that it
had agreed to decide the case because there was a conflict in the circuits,
with the Third Circuit finding the Beef Promotion Act constitutional in
Frame and the Ninth Circuit finding the California tree fruit program
unconstitutional in Wileman. If only comprehensive regulatory schemes
can pass constitutional muster under the First Amendment, as the United
Foods court has held, then there was never a conflict among the circuits
involving Frame and Wileman and the Supreme Court would not have agreed
to review the Ninth Circuit’s decision in Wileman on that basis.
But in fact there was a conflict (because the two approaches are treated
the same under Supreme Court’s Wileman analysis) and the Supreme
Court did review the case.
Ramifications of United Foods
With the recent rejection of the government’s effort to have the
entire Sixth Circuit review the decision of the United Foods panel, the
matter now sits squarely with the Solicitor General of the United States
who must decide whether to seek a Supreme Court review of this decision.
Weighing in the balance are the potential impact of this decision on other
commodity promotion programs not only in the Sixth Circuit but around
the country. It would appear that the fact that the Sixth Circuit has
struck down an Act of Congress as unconstitutional would on the face of
it make United Foods a likely candidate for serious consideration for
a decision by the Solicitor General to request Supreme Court review. Others,
however, argue that the mushroom industry is too small and the facts underlying
the case too unique to make the case an ideal candidate for a Supreme
Court petition. They suggest that the government should wait for another
case with much broader application to be decided before they pursue and
appeal to the Supreme Court.
Conclusion
The Sixth Circuit’s rejection of the government’s rehearing
request in United Foods has justifiably grabbed the attention of the commodity
promotion community. The attention of that community now is focused on
the office of the Solicitor General to see how he responds to the Sixth
Circuit’s potentially significant limitation on the reach of Wileman.
To avoid uncertainty and confusion that will likely be visited upon all
commodity promotion organizations, and to avoid an anticipated onslaught
of constitutional challenges to state and federal generic promotion programs
both within and without the Sixth Circuit, the Solicitor General would
be well advised to seek Supreme Court review of the Sixth Circuit’s
decision and let the Supreme Court tell us whether the Sixth Circuit’s
interpretation of Wileman is correct.
* The authors and the firm of McLeod, Watkinson
& Miller, along with John Roberts and Christopher Bartolomucci of
Hogan & Hartson, represented several agricultural groups in an amicus
curiae brief filed in the United Foods matter supporting the government’s
petition for rehearing and rehearing en banc.
|
