Summary of a Recent
Judicial Development in
Checkoff Programs

Third Circuit Holds Dairy
Checkoff Unconstitutional

Harrison M. Pittman
Staff Attorney

Summary of Decision

In Cochran v. Veneman, No. 03-2522, 2004 WL 333103 (3d Cir. Feb. 24, 2004), the United States Court of Appeals for the Third Circuit held that the Dairy Promotion Program, commonly referred to as the Dairy Checkoff, is unconstitutional.

Background

The Dairy Checkoff, authorized by the Dairy Promotion Stabilization Act of 1983 (Dairy Act), 7 U.S.C. §§ 4501-4583, requires milk producers to pay mandatory assessments of 15 cents per hundredweight of milk sold. Cochran, 2004 WL 333103, at *1. The mandatory assessments are used to fund the "'advertisement and promotion of the sale and consumption of dairy products [and] for research projects related thereto.'" Id. at *4 (quoting 7 U.S.C. § 4504(a)). Plaintiffs Joseph and Brenda Cochran brought an action in the United States District Court for the Middle District of Pennsylvania against defendants Ann Veneman, Secretary of the United States Department of Agriculture, and the National Dairy Promotion Board, arguing that the Dairy Checkoff "unconstitutionally compels them to subsidize speech with which they disagree." Id. at *2.

The plaintiffs argued that United States v. United Foods, Inc., 533 U.S. 405 (2001) controlled, while the defendants argued that Glickman v. Wileman Brothers & Elliot, Inc., 521 U.S. 457 (1997) controlled. See id. In United Foods, the United States Supreme Court held that mandatory assessments collected pursuant to the Mushroom Promotion, Research, and Consumer Information Act of 1990, 7 U.S.C. §§ 6101-6112, violated the First Amendment. See id. In Glickman the Court upheld the mandatory assessments authorized by the Agricultural Marketing Agreement Act of 1937 that were collected pursuant to marketing orders for California tree fruit. See id.

The defendants also argued that the Dairy Checkoff "constitutes 'government speech' and is therefore immune from First Amendment scrutiny and, moreover, that the Dairy Act is a species of economic regulation that does not violate the First Amendment." Id. The district court ruled in favor of the defendants, holding that the Dairy Checkoff survives the First Amendment scrutiny afforded to economic regulation. See id. The plaintiffs appealed the district court's decision to the Third Circuit. See id.

Analysis and Holdings

The Third Circuit explained that it had to determine whether the mandatory assessments collected pursuant to the Dairy Checkoff constitute government speech and are therefore immune from First Amendment scrutiny. See id. It also explained that if the assessments constitute private speech, it must determine whether the Dairy Checkoff violates free speech and association rights of dairy farmers. See id. Prior to examining these two issues, however, the court discussed the United Foods and Glickman holdings.

United Foods and Glickman

The Third Circuit explained that in Glickman the Court held that "compelled assessments for generic advertising of California tree fruit were ancillary to a comprehensive marketing program, and therefore were 'a species of economic regulation that should enjoy the same strong presumption of validity that we accord to other policy judgments made by Congress.'" Id. at *3 (citation omitted). The court also explained that in United Foods the Court "distinguished the statutory context at issue in United Foods from that in Glickman, explaining that under the stand-alone Mushroom Act 'the compelled contributions for advertising was itself the 'principal object' of the Mushroom Act.'" Id. at *4 (citation omitted). See also United Foods, 533 U.S. at 415 (stating that "[w]e have not upheld compelled subsidies for speech in the context of a program where the principal object is speech itself.").

Government Speech vs. Private Speech

The Third Circuit explained that the government is prohibited by the First Amendment "from regulating private speech based on its content," and recognized that the Supreme Court has "'permitted the government to regulate the content of what is or is not expressed when [the government] is the speaker or when [the government] enlists private entities to convey its own message.'" Id. at *7 (citation omitted). The court also explained that in United States v. Frame, 885 F.2d 1119 (3d. Cir. 1989) it held that the Beef Checkoff Program, which operated similarly to the Dairy Checkoff, "was not government speech because it required only beef producers to fund it and it attributed the advertising under the program to the beef producers." Id. (citation omitted). Applying its holding in Frame to the Dairy Checkoff, the court held that the role of the government in the Dairy Checkoff "is in all material respects the same as it was in the . . . [Beef Checkoff]" and "under the precedent established in Frame, the Secretary's supervisory responsibilities are not sufficient to transform the dairy industry's self-help program into 'government speech.'" Id. at *8. The court thus held that the mandatory assessments constituted private speech and that the Dairy Checkoff therefore was not immune from First Amendment scrutiny. See id.

Free Speech and Association Rights

The court next considered whether the Dairy Checkoff violated the plaintiffs' First Amendment free speech and association rights. See id. In doing so, the court stated that it had to determine whether the dairy producers "are 'bound together and required by the statute to market their products according to cooperative rules[,]. . . for purposes other than advertising, or speech.'" Id. It explained that the First Amendment protects the right to refrain from speaking and association and that the government cannot "compel individuals to fund speech or expressive associations with which they disagree." United Foods, 533 U.S. at 411 (citation omitted). It also explained, however, that when "regulation compelling funding for speech is ancillary to a broader collective enterprise that otherwise restricts the individual's market autonomy, it is considered 'economic regulation,' which enjoys a 'strong presumption of validity' when facing First Amendment challenge." Id. (citation omitted).

The court held that the district court misapplied Glickman when it held that the mandatory assessments were constitutional, noting that United Foods clearly recognized that Glickman only applied in situations "in which individuals are 'bound together' in a collective enterprise, such as a union or an integrated state bar, and the compelled subsidies are the 'logical concomitant of a valid scheme of economic regulation.'" Id. at *9 (citation omitted). The court stated that

[t]he provisions of the Dairy Act do not require milk producers to participate in a collective enterprise and do not compel them to market their product, fluid milk, according to any rules of a cooperative. Although the dairy industry is "regulated" in the sense that it is subject to a patchwork of state and federal laws, there is no association that all milk producers must join that would make the entire industry analogous to a union, an integrated bar[,] or the collective enterprise at issue in Glickman. The Dairy Act is a free-standing promotional program that applies to all dairy producers regardless of whether they are subject to marketing orders or any other dairy regulations. It is not ancillary to any enterprise or association for milk that encompasses all dairy producers.

Id.

The court added that

as the Court in United Foods determined that speech is the principal purpose of the Mushroom Act, so it is of the Dairy Act. Indeed, "almost all of the funds collected under the mandatory assessments are for one purpose: generic advertising." In United Foods, the Court made clear that compelled subsidies may not be upheld where they are only germane to a program whose "principal object is speech itself." We conclude, therefore, that being compelled to fund advertising pursuant to the Dairy Act raises a First Amendment free speech and associational rights issue.

Id. (citations omitted).

The court concluded that "this case runs on all fours with the teachings and holdings of United Foods, and accordingly [we] hold that the . . . [Dairy Checkoff] does not survive the First Amendment challenge lodged by . . . [plaintiffs]. The district court erred in sustaining the constitutionality of the Dairy Act on the basis of Glickman." Id. at *13.

The case was decided on February 24, 2004; this summary was posted Mar. 4, 2004.