Gone in a Mushroom Cloud

Gone in a Mushroom Cloud — by Lee Pitts

Whether you like your beef with or without mushrooms, a recent decision by the Supreme Court is going to leave a decidedly toadstool taste in the collective mouth of the beef industry for a long time. In upholding a previous ruling by the Sixth Circuit Court the Supremes ruled the mushroom checkoff´s advertising program violated the free speech rights of mushroom growers. In doing so it struck down the mushroom checkoff and opened the door to a challenge of the beef and pork checkoffs.


A Lot To Lose

In a landmark 6 to 3 decision the Supreme Court ruled June 25, in the case titled United States vs. United Foods, that a mandatory mushroom promotional campaign violated the First Amendment rights of mushroom producers because it forced all mushroom handlers to pay for generic advertising whether or not they agreed with the message. United Foods had argued that the mandatory promotional campaign forced it to pay for ads that also helped its competitors. The Supreme Court agreed with United Foods and ruled against the government and the checkoff.

In writing the majority opinion Justice Kennedy wrote, “Just as the first Amendment may prevent the government from prohibiting speech, the amendment may prevent the government from compelling individuals to express certain views.” Four years ago in a case brought by tree fruit growers Wileman and Elliott the Supreme Court ruled that the forced tree fruit advertising program WAS constitutional. The Justices made the important distinction in the United Foods case that tree fruits are part of an overall regulated marketing program whereas mushrooms are not.

“Most of the funds at issue are used for generic advertising; and there are no marketing orders regulating mushroom production and sales, no antitrust exemption, and nothing preventing individual producers from making their own marketing decisions,” wrote Stevens. “Mushroom growers are not forced to associate as a group that makes cooperative decisions.”

The same could be said of both pork and beef.

So, it seems the only chance for beef and pork producers to save their checkoffs is to convince the court that their industries have a cooperative marketing program that is heavily regulated by the government. Although the dairy people might be able to prove it, it´s a hard stretch to make the same argument for beef.

Despite protestations to the contrary from the NCBA and the National Pork Producers Council, this Supreme Court ruling may spell doom for most agricultural checkoff programs. Although the CBB and NCBA may currently be in denial about this prospect, the NCBA admitted as much in their friend-of-the-court brief in siding with the government versus the mushroom growers. The NCBA lawyers wrote that a decision in favor of United Foods threatens the numerous other agricultural commodity programs established pursuant to federal and state law, including the beef, soybean, dairy and egg promotion programs.

The importance of the mushroom case to other checkoff programs is evidenced by the organizations that paid to file friend-of-the-court briefs on behalf of the government and the USDA. Included in this group are the American Mushroom Institute, the American Soybean Association, the National Milk Producers Federation, the Milk Industry Foundation, the United Egg Producers, the United Egg Association and NCBA. All beneficiaries of current checkoff programs, by the way.

One of the big winners in the case was the Western Organization of Resource Councils who joined in a friend-of-the-court brief on behalf of United Foods. John Smillie, WORC´s Program Director, said that the Supreme Court´s decision “should provide a basis for challenging the constitutionality of the beef and pork checkoff programs as unconstitutional forced speech, because of the similarity of these programs to the mushroom checkoff program.”

The Higher Court

United Foods Inc. is a large agricultural enterprise based in Tennessee that grows and distributes mushrooms. Until the recent Supreme Court decision there had been a checkoff on mushrooms not to exceed 1 cent per lb. of mushrooms produced or imported. The mushroom checkoff was established, just like beef, with an Act and Order of Congress and the assessments were earmarked for mushroom promotion, research, consumer information and industry information.

United Foods has refused to pay its mushroom checkoff assessments since 1996. The USDA and federal government responded to United Food´s civil disobedience by using the 1990 Act and Order which formed the Mushroom Council and also authorizes the collection of checkoff money. The USDA filed an action in the U.S. District Court for the Western District of Tennessee seeking an order compelling United Foods to pay up.

United Foods refused to pay the checkoff because they had been spending their own advertising and promotion dollars to convey the message that its brand of mushrooms was superior to those generic mushrooms grown by producers and advertised by the Mushroom Council. It strongly objected to being charged for a message that devalued its own mushrooms.

In preliminary legal jostling an administrative law judge dismissed United Food´s petition and a judicial officer of the USDA concurred that United Foods should be forced to pay its assessment. (This has been a similar response to beef checkoff challenges.) However, United foods did not let it drop. They appealed those decisions in District Court and, they too, agreed that United Foods should be forced to pay. With seemingly the last bullet in their gun, United Foods appealed the District Court decision to the Sixth Circuit Court which finally ruled in their favor by reversing the earlier decisions. This time it was the government´s turn to appeal, which they did to the U.S. Supreme Court. After all, the USDA knew that if United Foods was allowed to win their case it threatened all other checkoff programs which it oversees.

The Supreme Court agreed to hear the case and after considering all sides of the argument ruled that United Foods did NOT have to pay the checkoff because it DID violate their First Amendment rights. There can be no further appeals.

People For The Ethical Treatment of Mushrooms

United Foods argued forcefully that the checkoff assessment was a forced subsidy for generic advertising and as such, violated their First Amendment rights. In agreeing Justice Steven wrote: “The First Amendment values are at serious risk if the government can compel a citizen or group of citizens to subsidize speech on the side that it favors.” The majority of the court felt that the United Foods case was different than the earlier Wileman-Elliott case in which the justices ruled 5-4 that the tree fruit checkoffs were constitutional. Wrote Stevens, “The California tree fruits were marketed under detailed marketing orders that had displaced many aspects of independent business activity.”

Although Justice Kennedy delivered the opinion of the court it was Justice Scalia who probably put it in more understandable terms. During the trial he asked the USDA to pretend he were a member of a fictitious group called People For The Ethical Treatment of Mushrooms. And that he, as a grower, enjoyed raising and selling mushrooms but did not want people to eat the poor little creatures. How could he be compelled, as a member of the People for the Ethical Treatment of Mushrooms, to pay a fee to promote the eating mushrooms when he disagreed with that? Likewise, why should a producer of natural beef be forced to pay for generic beef ads when most of the beef being advertised is produced in a way that producer does not agree with?

So What Does It Mean?

The USDA and NCBA probably did not expect this outcome. Now, seemingly their only hope is to say that the beef industry is regulated by the government so that it qualifies under the Wileman decision instead of United Foods. In other words, they must prove that promotion of beef is part of a government marketing program. How they square this with previous comments that the CBB and NCBA are producer run and producer driven organizations will make for some interesting press releases.

Although the Supreme Court mushroom decision does not, by itself, put an end to the beef checkoff it is probably the beginning of the end. Even if a voluntary program results, the NCBA with nearly 90% of its budget coming from the mandatory checkoff, could vaporize in a mushroom cloud.

After the USDA ruled there were not enough valid signatures on the Livestock Marketing Association´s petitions for a referendum on the beef checkoff the Cattlemen´s Beef Board and the NCBA said in a press release that the checkoff issue was now “behind them.” In reality, the battle for beef bucks is just now beginning.

There are still two court cases that could have a big impact on how long the NCBA can live in the comfort to which it has become accustomed. Like United Foods, Steve and Jeanne Charter in Montana refused to pay the beef checkoff to force the USDA to come after them. The Charters vehemently objected to the NCBA merger and their arrogant acts. The USDA did come after the Charters, and Steve and Jeanne have spent nearly $25,000 holding them at bay. The judge in their case said he wanted to wait until after the Supreme Court ruled in the mushroom case before he made his decision in the Charter´s case.

Immediately following the Supreme Court decision in the mushroom case the Charter´s lawyer was ready to seek an immediate dismissal of their case, but the federal attorney prosecuting the Charters asked them to delay their petition to dismiss for one week because the USDA was holding extensive meetings on whether or not to throw in the towel.

We would be very surprised if that happens. The checkoffs are USDA´s baby. They get paid for administering them and often point to the checkoffs as their version of what a good government can do for farmers and ranchers. There are also some people who believe USDA´s support has been bought and paid for by special interest groups represented by the checkoff boards themselves.

One of the big questions remaining is how much money the CBB, NCBA and NPPC will be able to stuff in their sock before they are stopped and before some judge demands that all future moneys be placed in an escrow account. The Sheep Industry Association has remained in business long after its checkoff was halted. The beef checkoff collects close to $1.7 million per week or nearly $7 million per month. Assuming they can´t use the money for advertising and other causes with free speech considerations, how will they spend the money?

The other white meat´s checkoff program was standing on wobbly legs anyway. Given last fall´s vote by producers to do away with the mandatory pork checkoff, and the fact that the USDA is already under fire from producer groups, and at least one lawsuit has already been filed against USDA for arbitrarily disregarding the producer vote, this Supreme Court decision could be the straw that breaks their back.

The Judges Aren´t Done Yet

In view of a decision by Federal District Court Judge Charles Kornmann in a suit brought by the Livestock Marketing Association, the Western Organization of Resource Councils and three South Dakota producers, the CBB and NCBA had better be very careful of any further producer communications spinning this recent Supreme Court decision in their favor. Judge Kornmann was sharply critical of the CBB and NCBA and issued a preliminary injunction against any further producer communications that are persuasive or political in nature. Kornmann decreed that such industry information was done to “perpetuate the existence of the CBB and the checkoff itself.” He also said, “I believe that these producer communications violate the Beef Promotion and Research Act itself.”

On August 14 the LMA will be back in court in front of Judge Kornmann who will now have the most recent Supreme Court decision to consider. If the USDA does not throw in the towel there will probably be a parade of lawsuits and challenges to the beef checkoff at both national and state levels. One argument checkoff supporters may use in a desperate attempt to sway public opinion will be the depressing effect the Supreme Court´s decision could have on the beef market. On the day the United Food´s decision was announced a beef market that had been drifting lower, ended higher. A day later August live cattle made new yearly highs. Slapped on the wrist by Judge Kornmann for their industry propaganda campaign, the NCBA and CBB will have a difficult time swaying the court of public opinion. Even if they do, that court won´t matter because a higher court has already had the last say.

Mushrooms can be grown by throwing them manure and keeping them in the dark. As the implications of this Supreme Court decision sink in it will become more difficult for checkoff organizations to treat their producers in the same manner.