Gerawan Farming, Inc. v. Veneman

• Citation: 85 Cal.Rptr.2d 598,72 Cal.App.4th 1025
• Decision Date: 08 June 1999
• Docket Number: No. F031142,F031142
• Parties: Previously published at 72 Cal.App.4th 1025 72 Cal.App.4th 1025, 99 Cal. Daily Op. Serv. 4464, 1999 Daily Journal D.A.R. 5679 GERAWAN FARMING, INC., Plaintiff and Appellant, v. Ann M. VENEMAN, as Secretary etc. et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

Page 598

85 Cal.Rptr.2d 598

Previously published at 72 Cal.App.4th 1025

72 Cal.App.4th 1025, 99 Cal. Daily Op. Serv. 4464,

1999 Daily Journal D.A.R. 5679

GERAWAN FARMING, INC., Plaintiff and Appellant, v. Ann M. VENEMAN, as Secretary etc. et al., Defendants and Respondents.

No. F031142.

Court of Appeal, Fifth District, California.

June 8, 1999.

Review Granted Sept. 1, 1999.

APPEAL from a judgment of the Superior Court of Tulare County. Howard R. Broadman and Patrick J. O'Hara, Judges. ^*

Brian C. Leighton, Clovis, for Plaintiff and Appellant.

Bill Lockyer, Attorney General, Roderick E. Walston, Chief Assistant Attorney General, Charles W. Getz IV, Assistant Attorney General, Edna Walz and Tracy L. Winsor, Deputy Attorneys General, for Defendants and Respondents.

OPINION

VARTABEDIAN, J.

This is an appeal from a judgment on the pleadings rejecting appellant's attempt to enjoin as unconstitutional the administrative order that established the Plum Marketing Board of California. We affirm the judgment.

Facts and Procedural History

A. Statutory History

The agriculture industry, of course, produces necessary products for human consumption. Farmers and ranchers were important factors both in our new nation and as the United States expanded to the west. (Padberg & Hall, The Economic Rationale for Marketing Orders (1995) 5 San Joaquin Ag. L.Rev. 73, 73-75.) Even now, one source reports the agriculture industry employs a fourth of the American workforce in one way or another. (Looney, The Changing Focus of Government Regulation of Agriculture in the United States (Spring 1993) 44 Mercer L.Rev. 763, 763-765.) Because of its health, sociopolitical and economic impact on society, the agriculture industry has been the subject of regulatory and protective legislation since the earliest days of our nation. (Ibid.) Legislative attempts to regulate certain aspects of agricultural marketing--though sometimes struck down by the courts (see, e.g., Matter of Application of Foley (1916) 172 Cal. 744, 158 P. 1034 [labeling requirement for imported eggs]; Ex Parte Hayden (1905) 147 Cal. 649, 82 P. 315 [labeling requirements for fresh and dried fruit] )--were increasingly common in the early part of this century. (Looney, supra, 44 Mercer L.Rev. at p. 765.)

The direct economic regulation of agricultural production involved in the present case was a later development, precipitated by the economic crisis of the Great Depression. As an early part of the New Deal, Congress enacted the Agricultural Adjustment Act of 1933. (Act of May 12, 1933, ch. 25, 48 Stat. 31.) This law authorized the Secretary of Agriculture to implement a series of price supports for key commodities, funded by an assessment on first-level processors of the commodities. The United States Supreme Court held the act unconstitutional in United States v. Butler (1936) 297 U.S. 1, 56 S.Ct. 312, 80 L.Ed. 477; even so, the court's decision impliedly recognized the broad scope of the states' police power to impose such a program of price supports. (Id. at p. 68, 56 S.Ct. 312; see Warehouse Co. v. Tobacco Growers (1928) 276 U.S. 71, 48 S.Ct. 291, 72 L.Ed. 473; see generally Munn v. Illinois (1876) 94 U.S. 113, 125-130, 24 L.Ed. 77 [state police-power regulation of pricing in industries "affected with a public interest"].) Thus, the decision was based on the limitations of federal power: "The act invades the reserved rights of the states. It is a statutory plan to regulate and control agricultural production, a matter beyond the powers delegated to the federal government." (United States v. Butler, supra, 297 U.S. at p. 68, 56 S.Ct. 312.)

As the New Deal moved forward, Congress enacted the Agricultural Marketing Agreement Act of 1937. (Act of June 3, 1937, 50 Stat. 246 (hereafter AMAA).) The AMAA provides for voluntary marketing agreements for all commodities and mandatory marketing orders for milk and other specified commodities. The United States Supreme Court upheld the AMAA in U.S. v. Rock Royal Co-op. (1939) 307 U.S. 533, 59 S.Ct. 993, 83 L.Ed. 1446. The court held that the act was within the general police power and that Congress had the power to act under the commerce clause of the United States Constitution. (Id. at p. 571, 59 S.Ct. 993.)

The State of California adopted a similar statutory mechanism for regulation of agricultural marketing, the California Marketing Act of 1937 (Stats.1937, ch. 404, § 1, p. 1329, now codified as Food & Agr.Code, §§ 58601 et seq. (hereafter the Act).) ¹ In its declarations of policy, the Act lists a number of structural problems in the "marketing of agricultural commodities in this State," including "the inability of individual producers to maintain present markets or to develop new or larger markets for California-grown commodities." (Food & Agr.Code, § 58651.) The Legislature declared: "These conditions vitally concern the health, peace, safety and general welfare of the people of this state." (Food & Agr.Code, § 58652.) "The marketing of commodities within this state is hereby declared to be affected with a public interest." (Food & Agr.Code, § 58653.)

Under both the AMAA and the Act, producers of a particular commodity can vote to band together to regulate some or all of the aspects of production and marketing of the commodity, subject to certain findings and approval by federal or state agriculture officials. A board, composed of producers, administers the governmental order implementing the regulations upon which the producers have agreed. The so-called "marketing order" can cover ripeness and size standards, grading and inspection, allocation of production volume of each individual producer, industry-wide ("generic") advertising for the particular fruit, and price regulation. (See Voss v. Superior Court (1996) 46 Cal.App.4th 900, 907-908, 911-920, 54 Cal.Rptr.2d 225.)

B. Roots of the Present Litigation

From 1939 until 1991, plum production in California was governed by federal marketing orders promulgated pursuant to the AMAA. In 1987, the present appellant, Gerawan Farming, Inc., and other producers challenged the constitutionality of the federal tree fruit marketing orders through a federal administrative proceeding and subsequent judicial appeals. The primary issue appellant raised was "whether the requirement that [appellant] finance generic advertising [of plums by the marketing order administrator] is a law 'abridging the freedom of speech' within the meaning of the First Amendment." (Glickman v. Wileman Bros. & Elliott (1997) 521 U.S. 457, 117 S.Ct. 2130, 2134, 138 L.Ed.2d 585 [hereafter referred to as Wileman Bros.].)

While the 1987 challenge proceeded through the federal courts, the federal marketing order for plums ended in 1991 "after a majority of plum producers failed to vote for its continuation ." (Wileman Bros., supra, 521 U.S. at p. ----, fn. 5, 117 S.Ct. at p. 2135, fn. 5.) For two years there was a voluntary association of plum producers, but in 1993 a group of plum growers proposed a mandatory California Plum Marketing Order Program as authorized by the Act.

Pursuant to the Act, the Secretary of the California Department of Food and Agriculture (hereafter Secretary) conducted a referendum concerning the proposed marketing order. From among the 1,371 plum growers reporting harvests in 1993 (and therefore eligible to vote in the referendum), 780 growers voted. Slightly over 70 percent of the growers, representing over 57 percent of the fruit production from 1993, voted in favor of adoption of the proposed marketing order. These percentages exceeded the statutory minimums for adoption of a mandatory marketing order. The California marketing order, establishing the California Plum Marketing Board, became effective on April 20, 1994. ²

On October 31, 1994, appellant filed a complaint for declaratory and injunctive relief challenging the California marketing order. Appellant contended, as relevant here, that the Secretary failed to comply with the Administrative Procedure Act (Gov.Code, § 11346 et seq.) and that the marketing order violated appellant's free speech and association rights under both the state and federal Constitutions.

The trial court granted partial summary judgment in favor of the growers in an unrelated but parallel case (Tulare Co. case No. 94-166231) raising the same issues as raised by appellant in its complaint. The basis for the judgment was that the Secretary had failed to comply with the Administrative Procedure Act in adopting the marketing order. The Secretary appealed from the grant of summary judgment. The present case was stayed during that appeal.

While the parallel case was pending in this court, Gerawan and the other producers prevailed in the Ninth Circuit Court of Appeals. (See Wileman Bros. & Elliott, Inc. v. Espy (9th Cir.1995) 58 F.3d 1367, 1375-1376.)

In June of 1996, we issued an opinion in the parallel case. (Voss v. Superior Court, supra, 46 Cal.App.4th at p. 906, 54 Cal.Rptr.2d 225.) This court dismissed the appeal because the partial summary judgment was not an appealable judgment, but the court treated the purported appeal as a petition for writ of mandate. The court granted the writ of mandate, concluding that proceedings to adopt a marketing order are not governed by the Administrative Procedure Act. (Id. at pp. 911, 924, 54 Cal.Rptr.2d 225.)

At about the same time, the United States Supreme Court granted certiorari in the Ninth Circuit case challenging the federal marketing order. Once again, the parties agreed to stay the present case, this time until disposition of the Supreme Court case.

In June of 1997, the Supreme Court issued its opinion in Wileman Bros., upholding the generic-advertising provisions of the federal marketing order against the growers' First Amendment challenge. By a five-to-four majority vote, the court found "no First Amendment right to be free of coerced subsidization of commercial speech" in the regulatory environment...