Gallo Cattle Co. v. CA. Milk Advisory Bd.

• Decision Date: 16 September 1998
• Docket Number: No. 97-17182,97-17182
• Citation: 185 F.3d 969
• Parties: (9th Cir. 1999) GALLO CATTLE COMPANY, a California Limited Partnership, Plaintiff-Appellant, v. CALIFORNIA MILK ADVISORY BOARD; ANN M. VENEMAN, in her official capacity as the Secretary of the California Department of Food and Agriculture; STATE OF CALIFORNIA, Defendants-Appellees
• Court: U.S. Court of Appeals — Ninth Circuit

Page 969

185 F.3d 969 (9th Cir. 1999)

GALLO CATTLE COMPANY, a California Limited Partnership, Plaintiff-Appellant, v. CALIFORNIA MILK ADVISORY BOARD; ANN M. VENEMAN, in her official capacity as the Secretary of the California Department of Food and Agriculture; STATE OF CALIFORNIA, Defendants-Appellees.

No. 97-17182

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted September 16, 1998--San Francisco, California

Opinion Decided February 11, 1999

Opinion Withdrawn July 14, 1999

Decided July 14, 1999

Fred M. Isaacs, Follansbee & Associates, Wilsonville, Ore- gon, and Brian C. Leighton, Clovis, California, for the plaintiff-appellant.

William A. Wineberg, Wineberg, Simmonds & Narita, San Francisco, California, for the defendants-appellees. With him on the brief were Daniel E. lungren, Attorney General of the State of California, Charles W. Getz, IV, Assistant Attorney General, Mark J. Urban and Tracy L. Winsor, Deputy Attorneys Genrral, Sacramento, California and Tomio B. Narita, Wineberg, Simmonds & Narita, San Francisco, California, For defendants=appellees.

Appeal from the United States District Court for the Eastern District of California Edward J. Garcia, District Judge, Presiding.

Before: Thomas G. Nelson, Sidney R. Thomas, and Barry G. Silverman, Circuit Judges. Opinion by Judge T.G. Nelson

ORDER

The Opinion filed February 11, 1999, is withdrawn.

OPINION

T.G. NELSON, Circuit Judge:

Gallo Cattle Company ("Gallo") filed an action against the California Milk Producers Advisory Board ("CMAB"); Ann M. Veneman, Secretary of the California Department of Food and Agriculture ("Secretary"); and the State of California (collectively "defendants"), alleging that CMAB's compulsory assessments for the promotion and advertising of California milk and dairy products violate Gallo's First Amendment rights. The district court granted summary judgment in favor of the defendants, and Gallo timely appeals. We have jurisdiction under 28 U.S.C. S 1291. We affirm.

I.

A. Statutory and Regulatory Background

In 1937, California implemented the California Marketing Act ("Marketing Act" or "Act"), Cal. Food & Agric. Code S 58601 et seq., to prevent economic waste in the marketing of commodities, to develop more efficient and equitable methods of marketing commodities, and to provide the methods and means for maintaining present markets for, as well as developing new and larger markets for, commodities grown within the State. See Cal. Food & Agric. Code SS 58652, 58654. The Secretary is charged with administering the Marketing Act, see Cal. Food & Agric. CodeS 58711, and is authorized to issue "marketing orders" to regulate the marketing, processing, distributing, and handling of commodities. See Cal. Food & Agric. Code S 58741.

Pursuant to this grant of authority, the Secretary issued the Marketing Order for Research, Education and Promotion of Market Milk and Dairy Products in California ("Milk Marketing Order" or "Marketing Order") and formed CMAB "to assist in the administration of [the] Marketing Order."¹ See Milk Marketing Order, art. II, sec. A. The Milk Marketing Order authorizes CMAB to conduct research, prepare and present educational programs, engage in advertising and promotional activities, and develop and regulate the use of certification marks for dairy products. See Milk Marketing Order, art. III. To finance these authorized activities, the Milk Marketing Order allows CMAB to impose an assessment of $0.10 per hundred weight on milk produced by "producers " and "producer-handlers" in the State.² See Milk Marketing Order, art. IV, sec. A.

Gallo is a producer-handler under the Milk Marketing Order because it operates a dairy ranch which produces raw milk and also operates a cheese plant which uses the majority of its own milk production to manufacture cheese. Under the Milk Marketing Order, Gallo must therefore pay CMAB a $0.10 per hundred weight assessment on all of the raw milk that it produces.

B. CMAB Promotional Program

Since its formation, CMAB has conducted an integrated program for the promotion of milk and dairy products which includes advertising, merchandising, public relations, education and research. CMAB spends the majority of its annual budget promoting dairy products made from raw milk (such as fluid milk, cream, butter, cottage cheese, yogurt, cheese and ice cream). In doing so, CMAB attempts to increase the demand for milk produced by the California dairy farmers.

In the early 1980's, CMAB sponsored a task force designed to expand the then fledgling cheese industry in California. After determining that the vast majority of cheese sold in California was imported and therefore not produced with California milk, CMAB began a campaign to reverse this trend. One of the steps CMAB took to further this campaign was the development of the Real California Cheese(R) seal as a certification mark.³

CMAB licenses this seal, free of charge and on a nondiscriminatory basis, to all manufacturers of cheese on the condition that the cheese was manufactured from California milk, that it contains no preservatives and that it meets minimal quality standards prescribed by law. See CMAB "Real California Cheese" Seal Certified User Agreement. CMAB then seeks to generate demand for cheese, either branded or private label, which voluntarily carries the seal on its package. Consumer demand is created through various promotional activities including television, newspaper and billboard advertising; point-of-sale material in grocery stores; coupons; and in-store demonstrations and tastings in which all cheese bearing the seal in a particular store may participate.

By creating a demand for cheese bearing the Real California Cheese(R) seal, CMAB seeks to increase the demand for California raw milk by persuading cheese manufacturers to purchase raw milk from California dairy farmers, and by persuading retail outlets to purchase and offer for sale cheese produced from California milk. The beneficiaries of this effort are the dairy farmers of California who pay the assessment and who produce and sell the raw milk that is the principal ingredient of Real California Cheese(R).⁴

C. Procedural History

Gallo filed a complaint against CMAB, the Secretary and the State of California, alleging that CMAB's compulsory assessments violate Gallo's First Amendment rights. Gallo sought a refund of previously paid assessments, as well as a preliminary injunction permitting it to escrow its current assessments pending the outcome of the case.

The defendants moved for summary judgment which the district court granted in part by dismissing the State of California and CMAB on Eleventh Amendment grounds; by striking that part of Gallo's complaint which sought retroactive relief (i.e., a refund of previously paid assessments) against the Secretary in her official capacity; and by holding that the Secretary was immune from suit in her individual capacity, but allowing the suit to proceed against the Secretary in her official capacity. The district court also issued a preliminary injunction that prevented the Secretary from using any of Gallo's unpaid or future assessments.

The Secretary then moved to dissolve the preliminary injunction. The district court granted the Secretary's motion but stayed its order pending the U.S. Supreme Court's decision in Glickman v. Wileman Bros. & Elliott, Inc., 117 S. Ct. 2130 (1997). Gallo appealed, and this court stayed the district court's order dissolving the preliminary injunction. After the Supreme Court published its decision in Wileman , we vacated the district court's order and remanded the case to the district court for reconsideration. See Gallo Cattle Co. v. California Milk Advisory Bd., No. 97-15858 (9th Cir. Aug. 28, 1997).

On remand, the district court granted summary judgment in favor of the Secretary, finding the Wileman decision to be dispositive of Gallo's claims. Gallo timely appeals.

II.

We review the district court's grant of summary judgment de novo. See Bagdadi v. Nazar, 84 F.3d 1194, 1197 (9th Cir. 1996). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. See id.

III.

The issue before us is whether the district court erred by granting summary judgment in favor of the Secretary based on its conclusion that the Supreme Court's decision in Wileman, 117 S. Ct. 2130, was dispositive of the claims asserted in Gallo's First Amendment challenge to CMAB's mandatory assessment for the promotion of milk and dairy products.

In Wileman, the Supreme Court upheld against First Amendment challenge the mandatory assessment of California tree fruit growers. See 117 S. Ct. at 2134, 2142. The assessments in that case were used to fund generic advertising of California nectarines, plums and peaches.

In concluding that the assessments did not abridge the tree fruit growers' First Amendment rights, the Court stressed the importance of the statutory scheme under which the assessments were made. The Agricultural Marketing Agreement Act of 1937 ("AMAA") was enacted by Congress "to establish and maintain orderly marketing conditions and fair prices for agricultural commodities." Id. at 2134."Marketing orders promulgated pursuant to the AMAA are a species of economic regulation that has displaced competition in a number of discrete markets" and are expressly exempted from antitrust laws. Id. To avoid unreasonable fluctuation in the supplies and prices of these regulated markets, the marketing orders provided mechanisms that controlled the quality and quantity of the commodity that could be marketed, that determined the grade and size of the commodity, that made an orderly disposition of surplus, and that provided a uniform price to all producers in a particular market. See id.

The marketing...