Delano Farms Co. v. California Table Grape Com'n, 08-16233.

• Decision Date: 20 November 2009
• Docket Number: No. 08-16233.,08-16233.
• Citation: 586 F.3d 1219
• Parties: DELANO FARMS COMPANY, a Washington corporation; The Susan Neill Company, a California corporation; Lucas Bros Partnerhship, a California partnership, Plaintiffs-Appellants, v. CALIFORNIA TABLE GRAPE COMMISSION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

586 F.3d 1219

DELANO FARMS COMPANY, a Washington corporation; The Susan Neill Company, a California corporation; Lucas Bros Partnerhship, a California partnership, Plaintiffs-Appellants, v. CALIFORNIA TABLE GRAPE COMMISSION, Defendant-Appellee.

No. 08-16233.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted April 15, 2009.

Filed November 20, 2009.

Brian C. Leighton (argued), Clovis, CA, for the appellants.

Robert D. Wilkinson and Kendall L. Manock, Baker, Manock & Jensen, Fresno, CA, for the appellee.

Seth P. Waxman, Randolph D. Moss (argued), Todd C. Zubler, Brian M. Boynton, and Amy Oberdorfer Nyberg, Wilmer Cutler Pickering Hale and Dorr LLP, Washington, DC, for the appellee.

Appeal from the United States District Court for the Eastern District of California, Oliver W. Wanger, District Judge, Presiding. D.C. No. 1:96-cv-06053-OWW-DLB.

Before: STEPHEN REINHARDT, JOHN T. NOONAN and M. MARGARET McKEOWN, Circuit Judges.

Opinion by Judge MCKEOWN; Concurrence by Judge REINHARDT.

McKEOWN, Circuit Judge:

We are again faced with the question whether a state statutory scheme requiring growers to fund generic advertising for promotion of an agricultural product violates the First Amendment. Here, we consider the case of compelled assessments on California table grape¹ growers, levied through the California Table Grape Commission (the "Commission"). Specifically, we address whether this generic advertising scheme is the government's own speech and is thereby exempt from a First Amendment compelled speech challenge, based on the Supreme Court's analysis in Johanns v. Livestock Marketing Association, 544 U.S. 550, 125 S.Ct. 2055, 161 L.Ed.2d 896 (2005), and our decision in Paramount Land Co. LP v. California Pistachio Commission, 491 F.3d 1003 (9th Cir.2007). Because the Commission's promotional activities constitute government speech that is immune to challenge under the First Amendment, we affirm the district court's grant of summary judgment on this ground.

BACKGROUND

A. The Table Grape Commission

The Commission was established in 1967 by an act of the California Legislature (the "Ketchum Act"), Cal. Food & Agric. Code §§ 65500 et seq. The Legislature recognized that "[g]rapes produced in California for fresh human consumption comprise one of the major agricultural crops of California, and the production and marketing of such grapes affects the economy, welfare, standard of living and health of a large number of citizens residing in this state." § 65500. Noting that the "inability of individual producers to maintain or expand present markets or to develop new or larger markets for such grapes results in an unreasonable and unnecessary economic waste of the agricultural wealth of this state," the Ketchum Act created the Commission to support the table grape industry through centralized advertising, marketing, research, and government relations efforts. Cal. Food & Agric. Code § 65572.

The Commission is governed by a regulatory scheme that applies to all state councils and commissions that relate to agricultural and seafood markets. Cal. Food & Agric. Code §§ 63901-63901.3. See also Paramount Land, 491 F.3d at 1006 (explaining that California has established a regulatory scheme that applies to many state commissions and councils). The Commission is authorized to undertake a broad range of activities: (1) research into production, food safety, marketing, trend analysis, crop protection and production materials, (2) efforts to secure the elimination of trade barriers, (3) educational outreach about the benefits of table grape usage and consumption, (4) enhancement of the public conception of table grapes to increase overall demand for the product, (5) consumer education relating to environmental protection, (6) cooperative crisis resolution, (7) participation in negotiations with foreign governments, and (8) industry self-regulation. §§ 63901-63901.3, 65500, 65572. See also Paramount Land, 491 F.3d at 1006 (describing similar for California Pistachio Commission).

The Commission's work is funded primarily by assessments imposed on all shipments of California table grapes. Cal. Food & Agric. Code § 65604. The Commission prescribes the time and method of payment and directly collects the assessments. § 65604.

The Secretary (the "Secretary") of the California Department of Food and Agriculture (the "CDFA") retains authority over the Commission's activities through a few key functions. All of the commissioners are appointed and subject to removal by the Secretary. Cal. Food & Agric. Code §§ 65550, 65575.1. Any person aggrieved by any action of the Commission may appeal to the Secretary. Cal. Food & Agric. Code § 65650.5. Through this appeal process, the Secretary has the power to reverse the action of the Commission. § 65650.5. Further, "[u]pon the finding of 11 of the members of the [C]ommission that the operation of the provisions of [the Ketchum Act] has not tended to effectuate its declared purposes," the Commission may recommend to the Secretary that its operation be suspended. Cal. Food & Agric. Code § 65660. The Ketchum Act provides that the Secretary will then conduct a referendum among grape producers to determine if the Commission's operations should be suspended. § 65660.

In addition, like other entities in the state government, the Commission is subject to transparency, auditing, and ethics regulations that aim to promote public accountability. See e.g. § 65572 (detailing that the Commission must "keep accurate books, records and accounts of all of its dealings, which books, records and accounts shall be open to inspection and audit by the Department of Finance of the State of California or other state officer charged with the audit of operations of departments of the State of California").

B. Proceedings Below

A group of table grape growers, Delano Farms Company, Lucas Brothers Partnership, and The Susan Neill Company (collectively, "Delano Farms"), filed suit against the Commission in 1996, objecting "to being compelled by state law to pay money for generic advertising campaigns." Delano Farms v. Cal. Table Grape Comm'n ("Delano Farms I"), 318 F.3d 895, 896 (9th Cir.2003). The generic advertising to which Delano Farms objects focuses on the idea that fresh California table grapes are consumed primarily as a snack and are a healthy alternative for consumers, as opposed to other snack options like ice cream, chips, french fries, and buttered popcorn. The Commission popularizes this sentiment mainly through outdoor billboards and radio commercials.

Delano Farms maintains that the Commission's advertising efforts harmfully equate all table grapes, by virtue of the "generic" advertisements. Because the advertisements suggest that all table grapes are fungible and of the same quality, Delano Farms believes that the advertisements hurt Delano Farms's ability to distinguish its product from its competitors. Delano Farms also objects to supporting efforts it finds unnecessary or overly lavish, citing examples of travel and benefits to the Commission's employees, parties, and scholarship funds. As a consequence of a hefty assessment—$600,000 annually—Delano Farms argues that it has less money to put towards its own promotional and other activities.

Delano Farms sought "a declaratory judgment that the assessments violated their First Amendment rights, an injunction against collection, and for refunds." Delano Farms I, 318 F.3d at 896. The district court rejected Delano Farms's claim, determining that the assessment scheme is constitutional.

In the growers' first appeal Delano Farms I—we considered the district court's decision in the context of two thenrecently decided Supreme Court cases— Glickman v. Wileman Brothers & Elliott, 521 U.S. 457, 117 S.Ct. 2130, 138 L.Ed.2d 585 (1997), and United States v. United Foods, Inc., 533 U.S. 405, 121 S.Ct. 2334, 150 L.Ed.2d 438 (2001). As Delano Farms I explains, in Glickman, the Supreme Court considered a challenge to federal marketing orders that charged an assessment to tree fruit growers; "the Supreme Court held that the assessments did not violate the First Amendment rights of the dissenting growers not to be forced to pay for speech in which they preferred not to participate." Delano Farms I, 318 F.3d at 898 (internal citation omitted). The Court reasoned that the generic advertising was "part of a broader collective enterprise in which [the growers'] freedom to act independently is already constrained by the regulatory scheme." Id. (quoting Glickman, 521 U.S. at 469, 117 S.Ct. 2130).

Delano Farms I noted that United Foods, a later Supreme Court case, "went the other way." Delano Farms I, 318 F.3d at 898. The assessment at issue in United Foods concerned a program of compelled subsidies in the mushroom industry. Id. (internal citation omitted). We noted in Delano Farms I that the Supreme Court struck down the assessment scheme as unconstitutional; because in United Foods unlike in Glickman, there was no such "`comprehensive program,' just a scheme that consisted mostly of generic promotion of mushrooms." Delano Farms I, 318 F.3d at 898 (internal citation omitted).

We thus considered in Delano Farms I whether the Ketchum Act fell "on one side or the other of the Glickman-United Foods distinction." Delano Farms I, 318 F.3d at 899. On the basis of the initial pleadings, we determined that the Ketchum Act does not collectivize the industry in the same manner as the tree fruit order at issue in Glickman. Delano Farms I, 318 F.3d at 899. Reasoning that the "statute [is] similar to the one at issue in United Foods," we revived the suit, deeming Delano Farms "entitled to First Amendment protection against state compulsion to fund generic advertising." Delano Farms I, 318 F.3d at 899-900.

The parties returned to the district court and resumed litigation. On remand, the Commission amended its answer to allege that its speech and promotional...