Cal-Almond Inc. v. U.S. Dept. of Agriculture

• Decision Date: 14 July 1999
• Docket Number: CAL-ALMOND,No. 98-16921,98-16921
• Citation: 192 F.3d 1272
• Parties: (9th Cir. 1999) INC.; GOLD HILLS NUT COMPANY INC.; FRAZIER NUT FARMS INC.; BAL NUT INC.; CENTRAL VALLEY GROWER PACKING; HOCKER NUT FARM; JARDINE ORGANIC RANCH; ROTTEVEEL ORCHARDS; THERON SHAMOCHIAN INC.; BEARDS QUALITY NUT CO.; AMARETTO ORCHARDS; CARLSON FARMS, Plaintiffs-Appellants, v. U.S. DEPARTMENT OF AGRICULTURE, Defendant-Appellee
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1272

192 F.3d 1272 (9th Cir. 1999)

CAL-ALMOND INC.; GOLD HILLS NUT COMPANY INC.; FRAZIER NUT FARMS INC.; BAL NUT INC.; CENTRAL VALLEY GROWER PACKING; HOCKER NUT FARM; JARDINE ORGANIC RANCH; ROTTEVEEL ORCHARDS; THERON SHAMOCHIAN INC.; BEARDS QUALITY NUT CO.; AMARETTO ORCHARDS; CARLSON FARMS, Plaintiffs-Appellants, v. U.S. DEPARTMENT OF AGRICULTURE, Defendant-Appellee.

No. 98-16921

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted July 14, 1999--San Francisco, California

Decided September 21, 1999

Brian C. Leighton (argued), Clovis, California, for the plaintiffs-appellants.

Daniel Bensing (argued), United States Department of Justice, Washington, D.C., for the defendant-appellee.

Appeal from the United States District Court for the Eastern District of California; Robert E. Coyle, Chief District Judge, Presiding. D.C. No. CV-98-05049-REC/SMS.

Before: Stephen Reinhardt, Diarmuid F. O'Scannlain and William A. Fletcher, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We must decide whether an almond marketing order violates the First Amendment by imposing mandatory assessments on individual almond handlers to fund collective generic almond promotion.

I

Cal-Almond, Inc., et al. (collectively "Cal-Almond"), are almond handlers subject to an almond marketing order ("Almond Order") issued by the United States Department of Agriculture ("USDA") pursuant to the Agricultural Marketing Agreement Act, 7 U.S.C. SS 601 et seq. ("Act"). The Almond Order imposes assessments upon handlers based on the tonnage of almonds handled, and a substantial portion of the assessments is used to fund generic advertising, promotion, and marketing of almonds. The Almond Order affords almond handlers the option of directly advertising their own products in certain specified ways, for which they can receive credit against their assessments. More specifically, credit can be received for promotional activities, such as advertising directed at "end users, trade or industrial users," 7 C.F.R. S 981.441(e)(4)(i), so long as "[t]he clear and evident purpose of each activity shall be to promote the sale, consumption or use of California almonds," id. S 981.441(e)(2). Prior to the 1993-94 crop year, handlers could receive 100% credit for their own direct advertising pursuant to the "creditable" advertising program. Beginning with the 1993-94 crop year, handlers could receive only two-thirds credit for their own direct advertising pursuant to the "credit-back" advertising program. See id. S 981.441(a).

Cal-Almond filed an administrative petition with the USDA alleging that the creditable and credit-back advertising programs violated its First Amendment rights. The ALJ upheld Cal-Almond's First Amendment challenge to the advertising programs, relying on our decision in Cal-Almond, Inc. v. U.S. Dept. of Agriculture, 14 F.3d 429 (9th Cir. 1993) ("Cal-Almond I"), which held that the creditable almond advertising program constituted compelled speech that violated the almond handler's First Amendment rights, see id. at 440. Both parties appealed the ALJ's decision to the USDA's judicial officer, who stayed the proceedings pending the Supreme Court's decision in Glickman v. Wileman Brothers & Elliott, Inc., 521 U.S. 457 (1997) ("Wileman").

In Wileman, the Court upheld mandatory assessments for generic advertising of California tree fruits as "a species of economic regulation that should enjoy the same strong presumption of validity that we accord to other policy judgments made by Congress." Id., 521 U.S. at 477. In turn, the Supreme Court granted certiorari in Cal-Almond I, vacated this court's decision, and remanded for reconsideration in light of Wileman. See United States Dept. of Agriculture v. Cal Almond, Inc., 521 U.S. 1113 (1997) ("Cal-Almond II"). We, in turn, remanded Cal-Almond I to the district court with instructions to dismiss the First Amendment challenges to the advertising programs, citing Wileman. See Cal-Almond, Inc. v. Dept. of Agriculture, No. 94-17160 (9th Cir. Sept. 4, 1997) ("Cal-Almond III").

In light of the Supreme Court's decision in Wileman and Cal-Almond II, and our remand for dismissal in Cal-Almond III, the USDA's judicial officer reversed the ALJ's decision in this case and held that Wileman foreclosed Cal-Almond's First Amendment claims. Cal-Almond sought review in the United States District Court for the Eastern District of California, which also held that Cal-Almond's claims were foreclosed by Wileman. Cal-Almond subsequently brought this appeal.

II

Cal-Almond asserts that the Wileman analysis does not apply here because the Supreme Court considered the constitutional validity of purely mandatory assessments for generic advertising, while this case concerns the constitutional validity of assessments for generic advertising that are not purely mandatory because credit against the assessments is provided for certain forms of branded advertising. In Gallo Cattle Co. v. California Milk Advisory Bd., 185 F.3d 969 (9th Cir. July 14, 1999) ("Gallo"), we explained that, in order "[t]o determine whether Wileman is dispositive of the claims asserted by [a party], we will go through the same analytical steps that the Court used in Wileman." Id. at 974 (applying Wileman analysis and rejecting First Amendment challenge to mandatory assessments imposed under dairy promotion program that included generic and branded advertising). Thus, in order to determine whether Wileman is dispositive here, we must again go through the Wileman analytical steps.

Following Gallo's lead, we first examine the statutory scheme under which the mandatory assessments for almond marketing were imposed to determine whether constraints have been placed upon the handlers' independent action. See id. at 974. After assessing the statutory context, we proceed to Wileman's tripartite test, which determines whether the creditable and credit-back advertising programs abridge CalAlmond's First Amendment rights, or are "instead part of a `regulatory scheme' subject to review only as an economic regulation." Id. We must consider (1) whether the advertising programs impose a restraint on Cal-Almond's freedom to communicate any message to any audience; (2) whether the advertising programs compel Cal-Almond to engage in any actual or symbolic speech; and (3) whether the advertising programs compel Cal-Almond to endorse or finance any political or ideological views that are not germane to the purposes for which the compelled association is justified. See id.

A

The Act confers on the Secretary of Agriculture the power "to establish and maintain [ ] orderly marketing conditions for agricultural commodities." 7 U.S.C.S 602(1). Pursuant to this mandate, the Secretary is empowered to "[e]stablish or provid[e] for the establishment of production research, marketing research and development projects designed to assist, improve, or promote the marketing, distribution, and consumption or efficient production of " almonds, among other commodities. See id. S 608c(6)(I). Thus, as in Gallo and Wileman, it would appear that the almond handlers are "part of a broader collective enterprise in which their freedom to act independently is already constrained by the regulatory scheme," id., 521 U.S. at 469, nor, indeed, does CalAlmond dispute in its briefs on appeal whether handlers are so regulated.

B

Cal-Almond asserts that the assessments imposed under the Almond Order restrict its freedom to communicate by limiting the money that it has for advertising; most of Cal-Almond's other objections to the creditable and credit-back advertising programs also boil down to the impact that the assessments imposed under those programs have on its advertising budget. Cal-Almond effectively concedes that purely mandatory assessments would be constitutional under Wileman, but asserts that the credit option renders the assessments here unconstitutional. Cal-Almond contends that because it is less likely to receive credit for advertising that suits its purposes, its advertising budget is limited as compared to its competitors.

In Gallo, however, we expressly rejected the argument that a decrease in a producer's advertising budget constitutes a limitation on speech, stating that "although the assessments made under the Marketing Order may, as Gallo argues,`substantially reduce the amount of money Gallo has to spend on its own advertising used to distinguish its own product,' this `incidental effect of constraining the size of[Gallo's] advertising budget' does not itself amount to a restriction on speech." Id. at 975. This portion of our holding in Gallo followed necessarily from Wileman, wherein the Supreme Court made plain that "[t]he fact that an economic regulation may indirectly lead to a reduction in a handler's individual advertising budget does not itself amount to a restriction on speech." 521 U.S. at 470.

The Almond Order does not impose a restraint on Cal-Almond's freedom to communicate because Cal-Almond remains "free to advertise or otherwise communicate any message that it desires in any manner that it desires to any audience that it desires." Gallo, 185 F.3d at 975. Cal-Almond's assertion that the credit programs have a disparate impact upon the various handlers' advertising budgets is not relevant to the Wileman analysis. As the Supreme Court made plain:

Similar criticisms might be directed at other features of the regulatory orders that impose restraints on competition that arguably disadvantage particular producers for the benefit of the entire market. Although one may indeed question the wisdom of such a program, its debatable features are insufficient to warrant special First Amendment scrutiny.

Wileman, 521 U.S. at 474.

C

Cal-Almond asserts that the...