Lion Raisins, Inc. v. Ross

• Citation: 279 Cal.Rptr.3d 222,64 Cal.App.5th 718
• Decision Date: 25 May 2021
• Docket Number: C086205, C086206
• Court: California Court of Appeals
• Parties: LION RAISINS, INC., et al., Plaintiffs and Appellants, v. Karen ROSS, as Secretary, etc., Defendant and Respondent. The People ex rel. Karen Ross, as Secretary, etc., Plaintiff, Cross-defendant and Respondent, v. Raisin Valley Farms, LLC, et al., Defendants, Cross-complainants and Appellants.

64 Cal.App.5th 718

279 Cal.Rptr.3d 222

LION RAISINS, INC., et al., Plaintiffs and Appellants,

v.Karen ROSS, as Secretary, etc., Defendant and Respondent.

The People ex rel. Karen Ross, as Secretary, etc., Plaintiff, Cross-defendant and Respondent,

v.Raisin Valley Farms, LLC, et al., Defendants, Cross-complainants and Appellants.

C086205, C086206

Court of Appeal, Third District, California.

Filed May 25, 2021

Certified for Partial Publication.^*

Bertram T. Kaufmann ; Law Offices of Brian C. Leighton and Brian C. Leighton, Clovis, for Plaintiffs and Appellants in Case No. C086205.

Law Offices of Brian C. Leighton and Brian C. Leighton, Clovis, for Defendants and Appellants in case No. C086206.

Xavier Becerra, Attorney General, Robert W. Byrne, Assistant Attorney General, Randy L. Barrow, Ali A. Karaouni, and Linda Gandara, Deputy Attorneys General for Defendant and Respondent in case No. C086205 and Plaintiff and Respondent in case No. C086206.

KRAUSE, J.

This appeal concerns a California Raisin Marketing Order (the Marketing Order) first issued in 1998 by the California Department of Food and Agriculture (the Department) under the California Marketing Act of 1937 ( Food & Agr. Code, § 58601 et seq. ) (the CMA).¹ The Marketing Order establishes a "California Raisin Marketing Board" (the Board) and authorizes the Board to engage in research and promotional activities to aid producers in reducing the costs of production and increasing demand for California raisins. In accordance with the CMA, the Marketing Order is administered by the Department and funded by mandatory assessments imposed on California raisin producers.

The present appeal arises from two cases consolidated for purposes of trial. The first case, Lion Raisins, Inc., et al. v. Ross , case No. C086205, involves a complaint for declaratory and injunctive relief filed by Lion Raisins, Inc., et al. (collectively, Lion). The Lion complaint, which challenges the validity of the Marketing Order on a wide range of issues, seeks a declaration that the Marketing Order is unconstitutional and invalid, an injunction against future assessments, and a refund of all assessments paid since the 1999-2000 crop year.

The second case, People ex rel. Ross v. Raisin Valley Farms, LLC, et al. , case No. C086206, involves a complaint filed by the Department against Raisin Valley Farms, LLC, et al. (collectively, Raisin Valley), to recover unpaid assessments, and a related cross-complaint against the Department for declaratory, injunctive, and compensatory relief.² Similar to the Lion complaint, the Raisin Valley cross-complaint challenges the validity of the Marketing Order on multiple grounds.

The trial court initially entered judgment against the Department on the consolidated cases, concluding the Marketing Order was invalid because there was insufficient evidence that the Marketing Order was necessary to address severe economic conditions in the raisin industry. ( People ex rel. Ross v. Raisin Valley Farms LLC (2015) 240 Cal.App.4th 1254, 1259, 193 Cal.Rptr.3d 246 ( Ross ).) The Department appealed and we reversed, concluding the trial court's interpretation of the CMA was too narrow. ( Ross, supra , at p. 1267, 193 Cal.Rptr.3d 246.) We remanded the matter to the trial court for further proceedings consistent with our opinion. ( Ibid . )

On remand, after additional briefing, the trial court entered judgments in favor of the Department, denying the challenges to the Marketing Order. Lion and Raisin Valley appeal from those judgments, asserting numerous errors. First, appellants contend the court erred in rejecting their claim that the Board's promotional activities violated the "varietal benefit" and "non-disparagement" provisions of the Marketing Order. Second, appellants contend the court erred in concluding that the Raisin Bargaining Association (the RBA) was lawfully allowed to bloc vote as a cooperative marketing association in referendums to approve the Marketing Order. Third, they contend the court erred in concluding that the bloc-voting provisions of the CMA are constitutional. Fourth, they contend that the court erred in allowing the Department to abandon its "cornerstone" finding for the Marketing Order which, they argue, was not supported by the evidence. Fifth, they contend the court erred in concluding the Department had no duty to consider reasonable alternatives before adopting the Marketing Order. And finally, they contend the court erred in rejecting their claim that the Marketing Order violates their constitutional rights to free speech and free association.

With regard to the appeal in the Lion case, we shall modify the judgment to dismiss the "varietal benefit" and "non-disparagement" claims due to appellants’ failure to exhaust administrative remedies, and affirm the judgment as modified. We dismiss the appeal in the Raisin Valley case as premature under the one final judgment rule.

BACKGROUND LAW

The CMA and its federal counterpart, the Agricultural Marketing Agreement Act of 1937 ( 7 U.S.C. § 601 et seq. ) (the AMAA), were legislative responses to severe problems encountered by the agricultural industry during the Great Depression. ( Ross, supra , 240 Cal.App.4th at p. 1257, 193 Cal.Rptr.3d 246 ; see also Lion Raisins, Inc. v. United States (Fed. Cir. 2005) 416 F.3d 1356, 1358.) The programs were rooted in the legislative judgment that governmental intervention was necessary to preserve the agricultural industry. ( Ross , at p. 1257, 193 Cal.Rptr.3d 246.)

In enacting the CMA, the Legislature found that there was " ‘unreasonable and unnecessary economic waste’ " of California's agricultural wealth due to, among other things, disorderly marketing of commodities, unfair competition in the marketing of commodities, and the inability of producers to maintain present markets or develop new or larger markets for California-grown commodities. ( Voss v. Superior Court (1996) 46 Cal.App.4th 900, 907, 54 Cal.Rptr.2d 225 ( Voss ); § 58651.) According to the Legislature, such conditions "jeopardize the future continued production of adequate supplies of food ... and prevent producers from obtaining a fair return from their labor ...." (§ 58651.) Thus, in enacting the CMA, the Legislature declared its intent to aid producers in preventing economic waste, developing more efficient and equitable methods of marketing commodities, and restoring and maintaining their purchasing power at a more adequate, equitable, and reasonable level. ( § 58652.)

To effectuate its purposes, the CMA authorizes the Secretary of the Department (formerly the Director of Agriculture of the State of California) to enter into " ‘marketing agreements’ " and issue " ‘marketing orders.’ "³ ( Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 478-479, 101 Cal.Rptr.2d 470, 12 P.3d 720.) A "marketing agreement" is a contract-like arrangement binding only upon the signatories to the agreement, which governs the marketing and handling of such commodity. ( Id . at p. 478, 101 Cal.Rptr.2d 470, 12 P.3d 720 ; § 58745.) A "marketing order," in contrast, regulates all persons engaged in the marketing, processing, distributing, or handling of the commodity. ( Gerawan Farming, supra , at pp. 478-479, 101 Cal.Rptr.2d 470, 12 P.3d 720 ; §§ 58615, 58712, 58741, 58743, 58881.)

The CMA authorizes marketing orders that control, among other things, the quantity or quality of any commodity produced for market. ( Ross, supra , 240 Cal.App.4th at p. 1257, 193 Cal.Rptr.3d 246 ; §§ 58881 - 58888 ; 7 U.S.C. § 608c(6).) The CMA also separately authorizes marketing orders that establish "plans for advertising and sales promotion to maintain present markets or to create new or larger markets for any commodity ...." (§ 58889, subd. (a); Ross , at p. 1257, 193 Cal.Rptr.3d 246.)

The CMA provides that any advertising or promotional plan must be generic and "directed toward increasing the sale of the commodity without reference to any private brand or trade name that is used by any handler with respect to the commodity regulated by the marketing order ...." (§ 58889, subd. (b).) The CMA prohibits advertising or sales promotion programs that make "false or unwarranted claims in behalf of any product, or disparages the quality, value, sale, or use of any other commodity." (§ 58889, subd. (d).)

Funding of a marketing order comes from the producers or handlers directly affected by it. ( Ross, supra , 240 Cal.App.4th at pp. 1257-1258, 193 Cal.Rptr.3d 246.) The CMA gives the Department the power to levy and collect from each affected producer or handler an assessment calculated to defray the costs of the order. (§§ 58921, 58925, 58926, 58929.)

The CMA describes the procedure for adopting a marketing order. It provides that whenever the Department has reason to believe that a marketing order (or amendments to a marketing order) will promote the policy of the CMA with respect to any commodity, the Department shall give notice and hold a hearing. (§§ 58771, 58782; see also §§ 58773-58781, 58783-58788.) The notice must include the date and place of the hearing, the commodity and area covered by the proposed marketing order, and a statement that the Department will receive, at the hearing, evidence about the subjects for which the Department is required to make findings as a precondition to the issuance of an order. (§ 58774.)

The hearing on a proposed marketing order must be public, and all testimony must be received under oath. (§ 58782; see also § 58786.) The CMA requires the Department to consider all relevant matter presented at the hearing and to preserve a complete record of the proceedings for judicial review. (§§ 58782, 58783, 58787; Voss, supra , 46 Cal.App.4th at p. 924, 54 Cal.Rptr.2d 225.) Upon conclusion of the hearing, but prior to issuing a marketing order, the Department must make specific findings appropriate for the type of order proposed. (§§ 58811-58813; Ross, supra , 240 Cal.App.4th at p. 1258, 193 Cal.Rptr.3d 246.)

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