Livestock Marketing v. U.S. Dept. of Agriculture

• Decision Date: 21 June 2002
• Docket Number: No. Civ. 00-1032.,Civ. 00-1032.
• Citation: 207 F.Supp.2d 992
• Parties: LIVESTOCK MARKETING ASSOCIATION, an association of livestock markets, the Western Organization of Resource Councils, an association of grassroots of organizations that seek to protect natural resources, family farms, and rural communities, and Robert Thullner, Johnny Smith, Ernie J. Mertz, John Willis, Pat Goggins, Herman Schumacher, Jerry Goebel, and Leo Zentner, on behalf of themselves and others similarly situated, Plaintiffs, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Ann Veneman, Secretary of Agriculture, and the Cattlemen's Beef Board, an organization of cattle producers and importers charged with implementing the Beef Research and Promotion Order, Defendants, Nebraska Cattlemen, Inc., Gary Sharp, and Ralph Jones, Intervenors-Defendants.
• Court: U.S. District Court — District of South Dakota

207 F.Supp.2d 992

LIVESTOCK MARKETING ASSOCIATION, an association of livestock markets, the Western Organization of Resource Councils, an association of grassroots of organizations that seek to protect natural resources, family farms, and rural communities, and Robert Thullner, Johnny Smith, Ernie J. Mertz, John Willis, Pat Goggins, Herman Schumacher, Jerry Goebel, and Leo Zentner, on behalf of themselves and others similarly situated, Plaintiffs, v. UNITED STATES DEPARTMENT OF AGRICULTURE, Ann Veneman, Secretary of Agriculture, and the Cattlemen's Beef Board, an organization of cattle producers and importers charged with implementing the Beef Research and Promotion Order, Defendants Nebraska Cattlemen, Inc., Gary Sharp, and Ralph Jones, Intervenors-Defendants.

No. Civ. 00-1032.

United States District Court, D. South Dakota, Northern Division.

June 21, 2002.

COPYRIGHT MATERIAL OMITTED

Philip C. Olsson, Naomi J.L. Halpern, Ryan W. Stroschein, Olsson, Frank & Weeda, P.C., Washington, DC, Scott N. Heidepriem, Ronald A. Parsons, Jr., Johnson, Heidepriem, Miner, Marlow & Janklow, Sioux Falls, South Dakota, for plaintiffs.

Ori Lev, Thomas Millet, Carolyn McKee, U.S. Department of Justice, Washington, DC, Cheryl Schrempp Dupris, Assistant U.S. Attorney, Pierre, South Dakota, for defendants.

Jeffrey Alan Cole, Frieberg, Zimmer, Duncan & Nelson, Parker, South Dakota, Robert B. Frieberg, Gregory Thomas Brewers, Frieberg, Zimmer, Duncan & Nelson, Beresford, South Dakota, David S. Day, University of South Dakota School of Law, Vermillion, South Dakota, for intervenor-defendants.

MEMORANDUM OPINION AND ORDER

KORNMANN, District Judge.

INTRODUCTION

[¶ 1.] Plaintiffs instituted this action to challenge certain activities in connection with the Beef Promotion and Research Act (Title XVI, Subtitle A, of the Food Security Act of 1985), Pub.L. 99-198, Title XVI, § 1601, codified at 7 U.S.C. §§ 2901-11 ("the Act") and certain actions and inaction on the part of the United States Secretary of Agriculture ("Secretary") and the Cattlemen's Beef Board ("Board"). The Act authorizes the Secretary to promulgate a Beef Promotion and Research Order ("Order"), 7 U.S.C. § 2903, to establish a Cattlemen's Beef Promotion and Research Board ("Board"), 7 U.S.C. § 2904, and an Operating Committee, 7 U.S.C. § 2904(4)(A), to carry on a "program of promotion and research designed to strengthen the beef industry's position in the marketplace and to maintain and expand domestic and foreign markets and uses for beef and beef products." 7 U.S.C. § 2901(b). The program is funded by mandatory producer and importer contributions of one dollar per head on each transaction. 7 U.S.C. § 2904(8)(C). These mandatory contributions are referred to collectively as the "beef checkoff."

[¶ 2.] In fiscal year 2001, beef checkoff revenues totaled $86,099,403.00. Of that, $47,469,581.00 went to the Board. In states with a Qualified State Beef Council ("QSBC"), such as South Dakota, all checkoff funds collected by livestock markets go to the QSBC. There are 45 QSBC organizations. Each QSBC sends 50 cents to the Board, 25 cents to the National Cattleman's Beef Association ("NCBA"), a private trade group, for use in its non-Beef Board activities. The amount going to the Board included $60,907.00 collected from producers in states without a QSBC, $8,778,852.00 from importers, and $38,629,822.00 from QSBCs. The remaining funds were used by the QSBCs. The NCBA is the federation of QSBC's. The NCBA is a private contractor with the Board and 90% of all Board contracts are awarded to the NCBA. The Board consists of 110 members. The QSBC's nominate ten members to serve on the Beef Operating Committee which approves the budgets of the Board. The Board elects the Operating Committee.

[¶ 3.] In 1998, the Livestock Marketing Association ("LMA") initiated a petition drive to obtain a referendum on the question of the continuation of the beef checkoff program. LMA submitted the petitions to USDA on November 12, 1999. The Secretary did not act to validate the petitions and schedule a referendum vote. Plaintiffs instituted this litigation seeking 1) a declaratory judgment that the 1985 Act and the Secretary's action or inaction pursuant thereto is unconstitutional in violation of plaintiffs' rights to due process and equal protection, 2) an injunction prohibiting the Secretary from collecting assessments pursuant to the 1985 Act, 3) a preliminary injunction ordering defendants to immediately schedule a referendum election as to whether the checkoff should be retained or, alternatively, ordering defendants to immediately decide whether to schedule such a referendum, and 4) an order requiring the Board to immediately cease its expenditures for so-called "producer communications" and to make restitution to producers for in excess of $10 million claimed to have been illegally expended on such communications since 1998.

[¶ 4.] Plaintiffs' claims that the Board's producer communications activities violate both the Act and the First Amendment by using checkoff funds to disseminate public relations messages, including anti-referendum messages, and their claims that in implementing the petition validation program, the Secretary has failed to comply with the requirements of the Paperwork Reduction Act of 1995, were heard on January 25, 2001. The court issued a preliminary injunction on February 23, 2001. This prevented defendants from any further use of beef checkoff assessments to create or distribute any material for the purpose of influencing governmental action or policy with regard to the beef checkoff or the Board or both. It also prevented defendants from using assessments to block or discourage a referendum, from using assessments to attempt to influence beef producers to keep the Board or the checkoff program or both in existence, and from using assessments to laud the checkoff program by using descriptive words or phrases such as "fair", "accountable", "effective", "it's working", and the like. Livestock Marketing Association v. United States Department of Agriculture, 132 F.Supp.2d 817 (D.S.D.2001).

[¶ 5.] The United States Supreme Court issued a decision on June 25, 2001, in United States Department of Agriculture v. United Foods, Inc., 533 U.S. 405, 121 S.Ct. 2334, 150 L.Ed.2d 438 (2001), holding that the mandatory checkoff for mushroom promotions was in violation of the First Amendment and striking down as unconstitutional all portions of the Mushroom Act of 1990 which "authorize such coerced payments for advertising." United Foods v. U.S., 197 F.3d 221, 225 (6th Cir.1999), aff'd 533 U.S. 405, 121 S.Ct. at 2341, 150 L.Ed.2d 438. Following the issuance of the United Foods decision, the plaintiffs were allowed to amend their complaint to add a claim that the beef checkoff program violated plaintiffs' First Amendment rights to freedom of speech and freedom of association. The parties filed cross motions for summary judgment on the new First Amendment claims and those motions were denied. The First Amendment claims were bifurcated and a trial to the court on those issues was held on January 14, 2002.

DECISION

I. Standing.

[¶ 6.] Defendants and intervenors contend that plaintiffs LMA and the Western Organization of Resource Councils ("WORC") lack standing to raise the First Amendment claims at issue here. Standing is comprised of three elements:

First, the plaintiff must have suffered an injury in fact—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical. Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be fairly traceable to the challenged action of the defendant, and not the result of the independent action of some third party not before the court. Third, it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision.

Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-61, 112 S.Ct. 2130, 2136, 119 L.Ed.2d 351 (1992) (internal quotations and citations omitted). It is sufficient to confer standing that at least one of the plaintiffs qualifies and, if so, the court does not need to consider the standing issue as to the other plaintiffs in that action. Bowsher v. Synar, 478 U.S. 714, 721, 106 S.Ct. 3181, 3185, 92 L.Ed.2d 583 (1986), Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 264 n. 9, 97 S.Ct. 555, 562 n. 9, 50 L.Ed.2d 450 (1977).

[¶ 7.] Plaintiff Pat Goggins ("Goggins") is a grower, breeder and livestock marketer from Billings, Montana. Goggins objects to the use of his checkoff dollars to produce messages promoting all cattle rather than American cattle. Goggins is of the opinion that American produced cattle are superior to foreign produced cattle. Goggins objects to being compelled to pay for and promote foreign products. Goggins' auction business collects from producers and pays approximately $30,000 each year to the Board under the checkoff.

[¶ 8.] Plaintiff Johnnie Smith ("Smith") from Pierre, South Dakota, raises cattle and owns a partnership interest in a livestock market. Smith believes that the generic promotion of beef serves to promote imported beef. In fact, from September 11, 2001, to October 2001, foreign beef imports from Canada increased 26% while imports from Mexico increased 8%. Smith believes that foreign cattle are generally older with meat that is stringy and tough and that the foreign animals are more likely to have been subjected to pesticides. Smith opposes the use of his checkoff dollars to promote imported beef.

[¶ 9.] Herman Schumacher ("Schumacher") is a cattle producer from Herried, South Dakota. He also owns a livestock auction. He believes that generic advertising increases foreign imports which hurts his business. Foreign grown beef is in direct competition with his business. He objects to...