Summary of a Recent
Judicial Development in
Checkoff Decisions

DWF Enjoined from Collecting Fees
for Generic Marketing

Lynn Cox
National AgLaw Center Research Assistant

In an action brought by an alligator farmer against the Secretary of the Louisiana Department of Wildlife and Fisheries ("DWF") to permanently enjoin the DWF from collecting mandatory fees to finance generic marketing of alligator products, the United States District Court for the Middle District of Louisiana has ruled that the mandated fees violated the First Amendment as unconstitutional compelled commercial speech. Pelts & Skins, L.L.C. v. Jenkins, No. CIV.A.02-CV-384, 2003 WL 1984368, at *4 (M.D. La. Apr. 24, 2003).

Skins, plaintiff, operated an alligator farm with its own system of grading quality. See id. at *1. It marketed its products by advertising the "quality and uniqueness of its branded alligator product." Id. Pelts & Skins received most of its business from Europe. See id. The operation of the alligator farm was conditioned upon payment of mandatory license and tag fees to the DWF. See id. The fees were "deposited into both the Louisiana Fur and Alligator Public Education and Marketing Fund and Louisiana Alligator Resource Fund." Id. The DWF used a portion of the funds to finance "generic marketing of alligator products without differentiating any particular type, quality, or brand of alligator product." Id.

pThe DWF was responsible for controlling and supervising "all wildlife within the state, including fish." Id. at *2. The DWF was also responsible for "management, protection, conservation, and replenishment of the wildlife and fish" in addition to regulation of the shipping of skins. Id. It had statutory authority to "establish regulations and licensing procedures regarding the taking, possessing, and shipping of all alligators, raw alligator skins, and alligator parts." Id.

The statute at issue required that "every resident alligator hunter or farmer or nonresident alligator hunter" attach a tag when shipping alligator or alligator-skins out-of- state. Id. The resident alligator hunters and farmers and nonresident hunters were also required to pay an alligator shipping label fee for each alligator and an alligator tag fee for each raw skin. See id. The fees could not be more than "four dollars per alligator or skin." Id. Each alligator part had to have a label bearing the DWF license number and other relevant information to be shipped out of state. See id.

Resident alligator hunters were required to pay a $25.00 annual license fee to DWF before hunting. See id. at *3. The licensed alligator hunter could also pay another $25.00 fee to authorize him "to be accompanied by one resident assistant while hunting." Id. The resident alligator hunter was required to be a bona fide resident. See id.

Pelts & Skins sued to permanently enjoin the DWF from generically marketing alligators with the mandatory license and tag fees. See id. at *1. The DWF argued that the generic marketing did "not dilute product image in the mind of the consumer" and did "not reduce producer profits by lowering prices." Id. at *2. The DWF also contended that its generic advertising and public education programs were government speech because the state maintained "a degree of editorial control," was the "literal speaker," and was "ultimately responsible for the speech." Id. at *5. In addition, the DWF argued that the licensing fees were the "only sources of income for the Education and Marketing Fund" and were "de minimus compared to the tag fees that account for the majority of the Resource Fund." Id. at *2.

The court ruled that it had jurisdiction to hear the case, despite the Tax Injunction Act, 28 U.S.C. § 1341. See id. at *4. First, the court noted that the Tax Injunction Act did not bar the action because Pelts & Skins was not seeking to enjoin the collection of the fees but was seeking to enjoin the DWF from funding generic marketing with the fees. See id. Second, the court noted that the fees were not "taxes." See id. The court explained that taxes "'sustain[] the actual flow of revenue to the government,'" while fees are "'linked to some regulatory scheme.'" Id. It also explained that taxes provide benefits for the entire community, but fees raise money to help "'defray an agency's regulatory expenses.'" The court noted, "'a regulatory scheme will not constitute a tax unless the real purpose and effect of the statute and regulations promulgated thereunder is to raise revenues for the general support of the government.'" Id. (citations omitted).

The court rejected the DWF's contention that the generic marketing was government speech and ruled that the fees used for generic advertising violated First Amendment principles. See id. at *4-5. The court explained that the "essence of government speech is when the government speaks in favor of a public policy." Id. at *5. It also explained that "[t]he greater the degree of involvement, the greater chance that the government speech doctrine will be invoked." Id. The court noted that although the Secretary appointed nine of the Alligator Council's eleven members, the Secretary did not sit on the Council. See id. The court also noted that the Council did not represent the Secretary but represented the "cross section of alligator trappers, hunters, farmers, and coastal landowners from across the state." Id.

The Alligator Advisory Council was responsible for "reviewing and approving recommended procedures and programs to be funded from the Resource Fund and the Education and Marketing Fund" and ensuring that the revenues from the funds were spent for the specific goals of the Council. Id. at *6. The court noted that the resource fund was not funded through tax dollars, but through the tag and license fee revenues. See id. The court concluded that the fees paid by the alligator trappers, farmers, and hunters were similar to the union in Abood v. Detroit Board of Education, 431 U.S. 209 (1977). See id.

In Abood, teachers sought a declaratory judgment that an "agency shop" clause that was part of a collective bargaining agreement, was invalid. See id. The court explained that in Abood

[t]he Court held, in part, that though the clause was invalid insofar as it financed collective bargaining, contract administration, and grievance adjustments, First Amendment principles prohibited the union and the Board of Education from requiring any teacher to contribute (as a condition of employment as a public school teacher) to the support of an ideological cause he might oppose. In his concurrence, Justice Powell reasoned that a union is not representative of the people, but rather, is representative of only one segment of the population with certain common interests.

Id. at *5.

The court also examined Keller v. State Bar of California, 496 U.S. 1 (1990), in which several attorneys "challenged the use of compulsory state bar association dues to finance ideological or political activities with which members disagreed." Id. InKeller, the Supreme Court

held that the use of the dues in this manner violated the attorneys' First Amendment right of free speech when such expenditures were not necessarily or reasonably incurred for the purposes of regulating the legal profession or improving the quality of legal services. In so finding, the Court reasoned that the bar was different from a traditional government agency because it was not created to participate in state government; therefore, the bar was subject to similar constitutional rules as was, for example, Abood's labor union.

Id.

The district court explained that the present case was similar to Abood and Keller because the alligator trappers, farmers, and hunters could "easily be considered a narrow segment of society with common interests and one not representative of the general population." Id. at *6. The court also noted that there was "no evidence that the Alligator Advisory Council was created to participate in the state's general government." Id. It concluded that "the nexus between the trappers and hunters' mandatory fees and the Council's particular message" could not "rightfully be characterized as attenuated." Id. The court noted that there was a "close nexus between the alligator producers and the message funded." Id.

The court ruled that because the generic advertising involved was not governmental speech, Pelts & Skins was "free to challenge such advertising on First Amendment grounds." Id. In addressing Pelts and Skins' challenge, the court explained that the regulatory scheme more nearly resembled the one considered in United States v. United Foods, 533 U.S. 405 (2001) than the one considered in Glickman v. Wileman Bros. & Elliot, 521 U.S. 457 (1997). Id. It stated that

[I]n Glickman, the Court held that First Amendment protections were not abridged by various regulations contained in marketing orders promulgated by the Secretary of Agriculture (under the Agricultural Marketing Agreement Act of 1937) requiring California peach growers, handlers, and processors to pay assessments, from which were paid the cost of generic advertising of California peaches. Though the marketing orders regulated prices and surplus along with the quality, quantity, grade, and size of the commodity, they did not restrain producers from communicating any message to any audience, did not compel engagement in any actual or symbolic speech, and did not compel producers to endorse or to finance any political or ideological views. Nevertheless, the Court placed great weight upon the statutory context and its displacement (through the marketing orders) of competition and many aspects of independent business activity characterized by antitrust protection; indeed, the orders were expressly exempted from the antitrust laws. The Court specifically noted that "[t]he business entities that are compelled to fund the generic advertising at issue in this litigation do so as part of a broader collective enterprise in which their freedom to act independently is already constrained by the regulatory scheme."

Id.

The court also stated that in United Foods, the Court

held that the First Amendment prohibits government from compelling mushroom farmers to pay assessments that were used largely to fund advertisements promoting mushroom sales pursuant to the Mushroom Promotion, Research, and Consumer Information Act. Though the advertising message was that mushrooms are worth consuming whether or not they are branded, a mushroom producer objected to being charged for a message that seemed to be favored by a majority of producers, wanting instead to convey a message that its brand of mushrooms was superior to those grown by other producers. Minor as it may have seemed, the Court found this disagreement to be significant enough to subject the compelled funding to First Amendment scrutiny.

Id. at *7.

The court stated that the present case was different from Glickman for several reasons. See id. at *8. It noted that nothing prevented the farmers or trappers from making their own marketing, advertising, and branding decisions and that the alligator farmers set their own prices and standards of quality. See id. The court concluded that it could not "characterize the statutory scheme as a 'broad collective enterprise,' which constrains an alligator producer's freedom to act." Id. The alligator industry was not exempt from the antitrust law of the United States. See id. The court determined that the Louisiana alligator industry was not heavily regulated. See id.

The court also stated that the advertising was not "ancillary to a more comprehensive program restricting market autonomy which the Court considered to be significant in United Foods." Id. The DWF was not statutorily authorized to regulate prices, buyers, and marketing. See id. The percentage of total revenue spent on generic advertising was not an issue. See id.

The court noted that the Louisiana statutory scheme provided for funding from the fees for many "useful and productive activities to which plaintiff could not (and does not) object on First Amendment grounds." Id. at *9. These activities included "law enforcement, research and development of alligator habitat and protection and management of the species." Id. The court concluded that the state's "compelled generic advertising program" was "completely severable from those conservation activities." Id.

The court permanently enjoined the DWF from "future approving, authorizing or expending [of] revenues from the Louisiana Fur and Alligator Public Education and Marketing Fund or from the Louisiana Alligator Resource Fund for the purpose of generic alligator marketing." Id.

The case was decided on April 24, 2003; this summary was posted July, 2003