Appendix — Lovell v. Cochran Et Ux

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APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 03-2522

JOSEPH S. COCHRAN; BRENDA S. COCHRAN,

Appellants,

ANN VENEMAN, Secretary, U.S. Department of Agriculture;

NATIONAL DAIRY PROMOTION BOARD Appellees And FRED

LOVELL; LEE GREENWALT; JACKIE ROOT; EARNEST

NORMAN; STEPHEN MASHALL; CECIL MOYER; JAMES

VANBLARCOM,

Intervenors-Appellees.

January 12, 2004, Argued

February 24, 2004, Filed

JUDGES: Before: Sloviter. Rendell and Aldisert, Circuit

Judges.

The American public is very familiar with the “Got

Milk?™ “ ads on television and in the print media.

This appeal requires us to decide whether a federal statute

may compel a small dairy farm in Pennsylvania to help pay

for the white-mustache milk advertisements and other dairy

promotions. Implicated here are general First Amendment

precepts that protect the right to refrain from speaking and

the right to refrain from association, and the specific issue

of whether the government may compel individuals to fund

speech with which they disagree.

Joseph and Brenda Cochran are independent small-scale

dairy farmers. They are not members of any dairy manu-

facturing or marketing cooperative. They alone determine

how much milk to produce, how to sell and market it and to

whom it will be sold.

The Dairy Promotion Stabilization Act of 1983, 7 U.S.C.

§ 4501 et seg. (“Dairy Promotion Act,” “Dairy Act,” or

“Act”), provides for the creation of the Dairy Promotion

Program and authorizes the Secretary of the Department of

Agriculture (“Secretary”) to issue an order creating the Na-

tional Dairy Promotion and Research Board (“Dairy Board”)

to administer the program. To finance the promotional

projects and the Dairy Board’s administration of them, the

Dairy Act and implementing order require every milk pro-

ducer in the United States to pay mandatory assessments of

15 cents per hundredweight of milk sold.” Jd. § 4504(g);

7 C.F.R. § 1150.152. Neither the Dairy Act nor the order

permits dissenting milk producers to withhold contributions

for advertising or promotional projects to which they object.

The Cochrans object to paying these assessments and filed

an action in the United States District Court for the Middle

District of Pennsylvania seeking a declaration that the Dairy

' The Dairy Act provides:

The order shall provide that each person making payment to a

producer for milk produced in the United States and purchased from

the producer shall . . . collect an assessment based upon the number

of hundredweights of milk for commercial use handled for the

account of the producer and remit the assessment to the Board.

The rate of assessment for milk . . . prescribed by the order shall be

15 cents per hundredweight of milk for commercial use or the

equivalent thereof, as determined by the Secretary.

7 U.S.C. § 4504(g).

ssnspeaerananenseenans niente eens,

Actviolates their First Amendment rights of free speech and

association.

The Cochrans operate a small commercial dairyfarm with

approximately 150 cows on about 200 acres of land in Tioga

County, north-central Pennsylvania. In contrast to many lar-

ger-scale commercial dairy farms, the Cochrans employ what

is known as “traditional” methods of dairy farming. Tradi-

tional dairy farming is less aggressive than larger-scale com-

mercial farming, as it allows cows more room to move and

graze and does not use the recombinant Bovine Growth

Hormone (rBGH).” The Cochrans believe that their methods

result in healthier cows, a cleaner environment and superior

milk. The Cochrans object to the advertising under the Dairy

Act because it conveys a message that milk is a generic

product that bears no distinction based on where and how it is

produced, and thereby forces them to subsidize speech with

which they disagree.

As the First Amendment may prevent the government from

prohibiting speech, it may also prevent the government from

compelling individuals to express certain views, Wooley v.

Maynard, 430 U.S. 705, 714, 51 L. Ed. 2d 752, 97 S. Ct.

1428 (1977); West Virginia State Bd. of Educ. v. Barnette,

319 U.S. 624, 642, 87 L. Ed. 1628, 63 S. Ct. 1178 (1943), or

pay suosidies for speech to which individuals object, Keller v.

State Bar of California, 496 U.S. 1, 9-10, 110 L. Ed. 2d 1,

110 S. Ct. 2228 (1990); Abood v. Detroit Dep't of Educ., 431

U.S. 209, 234, 52 L. Ed. 2d 261, 97 S. Ct. 1782 (1977).

? rBGH, also known as recombinant bovine somatotropin (rBST), is a

genetically engineered growth hormone administered to dairy cows to

boost milk production. Although the Food and Drug Administration has

approved the use of rBGH for dairy production in the United States,

consumer advocates and small dairy producers have questioned the

longterm effects of the growth hormone on humans, cows and the

environment. See Barnes v. Shalala, 865 F. < .pp. 550, 554 (W.D. Wis.

1994).

The Cochrans’ lawsuit named as defendants Ann Veneman

in her official capacity as Secretary of the United States

Department of Agriculture (“USDA”) and the National Dairy

Promotion Board, and sought declaratory and injunctive relief

from the remittance of compelled assessments by all dairy

producers to finance generic dairy advertisements. Alleging

that the Dairy Act unconstitutionally compels them to subsi-

dize speech with which they disagree, the Cochrans filed a

motion for summary judgment contending that their case was

controlled by the teachings of United States v. United Foods,

Inc., 533 U.S. 405, 150 L. Ed. 2d 438, 121 S. Ct. 2334

(2001), in which the Supreme Court held that compelled

subsidies under the Mushroom Promotion, Research, and

Consumer Information Act of 1990 (“Mushroom Act”), 7

U.S.C. § 6101 et seq., violated First Amendment protections.

The Government filed a motion to dismiss or, in the

alternative, for summary judgment, arguing that this case is

controlled by the teachings of Glickman v. Wileman Brothers

& Elliott, Inc., 521 U.S. 457, 138 L. Ed. 2d 585, 117 S. Ct.

2130 (1997), in which the Supreme Court upheld compelled

subsidies for advertising California tree fruit under two mar-

keting orders issued pursuant to the Agricultural Marketing

and Agreement Act of 1937 (“AMAA”), 7 U.S.C. § 608c ef

seq. The Government argued that the generic dairy advertis-

ing subsidized under the Dairy Act 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 Amend-

ment.’ The district court agreed with the Government and

* Seven Pennsylvania dairy farmers who support the Dairy Promotion

Act and Program petitioned the district court for leave to intervene as

defendants and the district court granted the petition for intervention under

Rule 24(a) of the Federal Rules of Civil Procedure. The Intervenors filed a

cross motion for summary judgment, echoing the arguments made by the

Government in its motion.

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granted summary judgment in its favor, holding that the Dairy

Act. survives the deferential First Amendment scrutiny

afforded to economic regulation. The Cochrans appeal.

We must decide whether the challenged communications

pursuant to the Dairy Act are government speech and thereby

immune from First Amendment scrutiny. If these commu-

nications are private speech, we must decide whether the

Dairy Act violates the First Amendment free speech and

association rights of dairy farmers. In doing so, we must

consider the quantum of scrutiny to be applied to determine

the validity of regulations, such as the Dairy Act, that compel

commercial speech.

For the reasons that follow we reverse the judgment of the

district court and hold that the compelled speech pursuant to

the Dairy Act is private speech, not government speech, and

is therefore subject to First Amendment scrutiny. We hold

also that the Act violates the Cochrans’ First Amendment free

speech and association rights by compelling them to subsidize

speech with which they disagree. In so doing we conclude

that the subsequent Supreme Court decisions of Glickman in

1997 and United Foods in 2001 severely dilute the

precedential vitality of our ultimate holding in United States

v. Frame, 885 F.2d 1119 (3d Cir. 1989), in which we

concluded that the compelled assessments pursuant to the

Beef Promotion Research Act of 1985, 7 U.S.C. § 2901 ef

seq., Survived First Amendment scrutiny.

In determining the side on which the axe must fall—on

Glickman or on United Foods—we must start by examining

why the Supreme Court went one way in its first case of

Glickman and the other way in its subsequent decision in

United Foods.

In Glickman, producers of California tree fruits (including

nectarines, plums and peaches) challenged the constitutional-

ity of regulations contained in marketing orders promulgated

by the Secretary pursuant to the AMAA, 7 U.S.C. § 608c ef

seq., that imposed mandatory assessments on fruit tree grow-

ers to cover the expenses associated with the marketing

orders, including the costs of generic advertising. 521 U.S. at

460. The Court emphasized that besides the advertising

decisions, the economic autonomy of the fruit tree growers

was otherwise restricted by a broader collective arrangement

set forth in the marketing orders:

California nectarines and peaches are marketed pursuant

to detailed marketing orders that have displaced many

aspects of independent business activity that characterize

other portions of the economy in which competition is

fully protected by the antitrust laws. The business enti-

ties 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. at 469.

In addition to advertising, the marketing orders for Califor-

nia fruit tree growers provided for mechanisms for establish-

ing uniform prices, limiting the quality and quantity of tree

fruit that could be marketed, determining the grade and size

of the fruit and orderly disposing of any surplus. /d. at 461.

The orders also authorized joint research and develop

ment projects, quality inspection procedures and standardized

packaging requirements—all of which were financed by the

compelled assessments. /d.

The Court determined that the collective arrangement of

the fruit tree farmers was similar to the union arrangement at

issue in Abood v. Detroit Board of Education, 431 U.S. 209,

52 L. Ed. 2d 261, 97 S. Ct. 1782 (1977), and the bar associa-

tion at issue in Keller v. State Bar of California, 496 U.S. 1,

110 L. Ed. 2d 1, 110 S. Ct. 2228 (1990). In Abood, the Court

held that the infringement upon First Amendment associa-

tional rights by compelled assessments for a union shop

arrangement was “constitutionally justified by the legislative

assessment of the important contribution of the union shop to

the system of labor relations established by Congress.” 431

U.S. at 222. Similarly, in Keller, the Court held that the

infringement upon First Amendment associational rights by

compelled assessments for a state bar program was consti-

tutionally justified by the State’s interest in regulating the

legal profession and improving the quality of legal services.

496 U.S. at 13. Finding parallels between the facts of Abood

and Keller, in Glickman the Court concluded that as part of

the AMAA marketing orders, the 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.” 521 U.S. at 477.

“The opinion and the analysis of the Court [in Glickman]

proceeded upon the premise that the producers were bound

together and required by the statute to market their products

according to cooperative rules. To that extent, their mandated

participation in an advertising program with a particular

message was the logical concomitant of a valid scheme of

economic regulation.” United Foods, 533 U.S. at 412.

Four terms later, in United Foods the Court held that

mandatory assessments imposed on mushroom producers for

the purpose of funding generic mushroom advertising under

the Mushroom Act, 7 U.S.C. § 6101 ef seqg., violated the First

Amendment. 533 U.S. at 416. 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 are not part

of some broader regulatory scheme” and the advertising was

itself the “principal object” of the Mushroom Act. /d. at 415.

As such, “the mandated support is contrary to the First

Amendment principles set forth in cases involving expression

by groups which include persons who object to the speech,

but who, nevertheless, must remain members of the group by

law or necessity.” /d. at 413 (citing Abood, 431 U.S. at 209;

Keller, 496 U.S. at 1). The Court concluded that the com-

pelled assessments pursuant to the Mushroom Act were un-

like the situation in Abood, Keller and Glickman, in which:

Those who were required to pay a subsidy for the speech

of the association already were required to associate for

other purposes, making the compelled contribution of

moneys to pay for expressive activities a necessary

incident of a larger expenditure for an otherwise proper

goal requiring the cooperative activity.

Id. at 414.

Fundamentally, the Court noted that “[w]e have not upheld

compelled subsidies for speech in the context of a program

where the principal object is speech itself.” /d. at 415.

Concluding that the only program the compelled contribu-

tions for advertising pursuant to the Mushroom Act serve “is

the very advertising scheme in question,” the Court ruled that

the compelled assessments were not permitted under the First

Amendment. /d. at 416.

Guided by the express reasoning of the Court in Glickman

and United Foods, we must first look at the broader statutory

scheme presented in the Dairy Act, or more specifically, we

must ascertain whether the dairy producers are “bound to-

gether and required by the statute to market their products

according to cooperative rules” for purposes other than

advertising, or speech. United Foods, 533 U.S. at 412. It is to

a description of the Dairy Act we now turn.

Il.

The Dairy Promotion Program set forth in the Dairy Act is

one in a long series of federal “checkoff” programs for pro-

moting agricultural commodities.‘ Enacted in 1983, the

Dairy Act authorizes the Secretary of Agriculture to establish

a program for the “advertisement and promotion of the sale

and consumption of dairy products [and] for research projects

related thereto.” 7 U.S.C. § 4504(a). The declared purpose of

the Dairy Act is to provide for “an orderly procedure for

financing . . . and carrying out a coordinated program of pro-

motion designed to strengthen the dairy industry’s position in

the marketplace .. . .” /d. § 4501(b).

The Dairy Act is a stand-alone law that was not passed as

part of any other federal dairy regulatory scheme. It directs

the Secretary to appoint a Dairy Board composed of private

milk producers to administer the Dairy Promotion Program.

Id. §§ 4504 (b) & (c). The Act provides that every milk

producer must pay a mandatory assessment of 15 cents per

hundredweight of milk sold to finance the promotional

programs and the Dairy Board’s administration of them.

* Other stand-alone checkoff programs established by Congress which

have been subject to First Amendment challenges include: Beef Research

and Information Act of 1976 (“Beef Act”), 7 U.S.C. § 2901 ef seq.

(invalidated by Livestock Marketing Ass'n v. U.S. Dep't of Agric., 335

F.3d 711 (8th Cir. 2003) (reh’g den. Oct. 16, 2003)); Pork Promotion,

Research, and Consumer Information Act of 1985 (“Pork Act”), 7 U.S.C.

§ 4801 ef seq. (invalidated by Michigan Port Producers Ass'n, Inc. v.

Veneman, 348 F.3d 157 (6th Cir. 2003)); Mushroom Act, 7 U.S.C. § 6101

et seq. (invalidated in 2001 by United Foods, 533 U.S. at 405). Cf.

Glickman, 521 U.S. at 457 (upholding as constitutional marketing orders

for California tree fruits promulgated pursuant to the AMAA, 7 U.S.C.

§ 608c ef seqg., which included compelled assessments to fund, among

other things, generic advertising).

10a

Pursuant to the authority provided in 7 U.S.C. § 4503(a),

the Secretary issued an order in March 1984 establishing the

Dairy Board, 7 C.F.R § 1150.131, and the Board proceeded to

collect the mandatory assessments from all milk producers, 7

C.F.R § 1150.152. For the Cochrans, the compelled assess-

ments amount to roughly $ 3,500 to $ 4,000 per year.

The Dairy Board is composed of commercial milk produc-

ers who are nominated by “eligible associations,” which are

private associations of milk producers that engage in dairy

promotion at the state and regional level. /d. §§ 1150.133,

1150.273. The primary consideration in determining an

organization’s eligibility is “whether its membership consists

primarily of milk producers who produce a substantial vol-

ume of milk” and whose overriding interests lay in the pro-

duction and promotion of fluid milk and other dairy products.

Id. § 1150.274(b).

In 1994, the Dairy Board created Dairy Management, Inc.

(“DMI”), a District of Columbia corporation that now over-

sees and administers the promotional activities of the Dairy

Act. DMI is a joint undertaking of the Dairy Board and the

United Dairy Industry Association (“UDIA”), which is an

association of state and regional dairy promotional programs

that are considered “Qualified Programs” under the Dairy

Act. “Qualified Programs” are local promotional programs,

many of which preexisted the Dairy Act, to which milk

producers may contribute a portion of the money they would

otherwise pay in assessments under the Act. See 7 U.S.C.

§ 4504(g)(4), 7 C.F.R. §§ 1150.152(c), 1150.153. The Act

thus requires dairy farmers to pay either the full 15 cent per

hundredweight assessment to the Dairy Program or part to the

Dairy Program and part to a Qualified Program that engages

in state or regional generic advertising. The Dairy Board and

the DMI Board are composed entirely of private milk pro-

ducers and other private parties, and the Dairy Promotion

Program is funded entirely by private milk producers through

lla

the compelled assessments. The Dairy Promotion Program

website explains: “Checkoff programs are funded by dairy

producers—NOT TAXPAYERS. They are not governmental

programs; rather, they are businesses with governmental

oversight.”

The Secretary’s oversight responsibilities pursuant to the

Dairy Act are conducted by the Agricultural Marketing

Service (“AMS”), a division of the USDA, and are limited to

ensuring that the Dairy Promotion Program is in compliance

with the Act. See, e.g., 7 U.S.C. § 4507(a) (authorizing the

Secretary to terminate an order issued under the Act only

when she determines that it “obstructs or does not tend to

effectuate the declared policy of” the Act). AMS guidelines

explain that “[i]t is the policy of AMS in carrying out the

oversight responsibility to ensure that legislative, regulatory,

and Department policy requirements are met. It is not the

intent to impose constraints on board operations beyond these

requirements.” AMS, Guidelines for AMS Oversight of Com-

modity Research and Promotion Programs 1 (1994). The

Secretary’s oversight functions for the Dairy Program are

funded by the compelled assessments. 7 U.S.C. § 4504(g)(2);

7 C.F.R. § 1150.151(b). Moreover, the dairy producers,

not the government, control whether the Dairy Promotion

Program continues via a referendum process. 7 U.S.C.

§ 4506(a).

All advertising and promotional programs that are financed

by the compelled assessments under the Dairy Act and cre-

ated by the Dairy Board and DMI promote milk as a generic

product. 7 C.F.R. § 1150.114. Among advertising campaigns

financed by the Dairy Promotion Program are “Got milk? tm

“and “Ahh, the power of cheese.”

* Dairy checkoff Works!—How the Dairy Checkoff works, available at

http://www.dairycheckoff.com/howitworks. htm (last visited June 3, 2002

(J.A. at 231)).

12a

Ill.

In addition to the Dairy Act, the dairy industry is subject to

a patchwork of federal and state regulatory laws. The district

court noted four federal laws in particular that it deemed

relevant to this case: (1) the Agricultural Marketing Agree-

ment Act of 1937 (“AMAA”), 7 U.S.C. § 608c ef seq.; (2) the

Agriculture Act of 1949, 7 U.S.C. § 1446; (3) import control

regulations under 19 U.S.C. § 1202; and (4) the Capper-

Volstead Act, 7 U.S.C. § 291.

An examination_of the provisions of these statutes is cru-

cial to determine whether these legislative acts, in conjunc-

tion with the Dairy Act, bring the case at bar within the rubric

of Glickman—i.e., requiring that milk producers are bound

together and obligated by statute to market their products

according to some set of cooperative rules. The district court

held that such a cooperative arrangement exists for dairy

producers, but we conclude otherwise.

The AMAA, 7 U.S.C § 608c, permits the Secretary to issue

marketing orders that regulate the handling and sales of vari-

ous agricultural commodities, including milk, in different

regions of the country. For milk, the marketing orders estab-

lish a classification system and set minimum prices that han-

dlers must pay in the regions in which the orders apply. See

7 U.S.C. § 608c(5); 7 C.F.R. § 1000.1 et seg. The AMAA

applies only to “handlers” of the covered commodities.

7 U.S.C. §§ 608c(1) & (5)(A). “Producers,” such as dairy

farmers in general, and Joseph and Brenda Cochran in

particular, are specifically exempted from the application of

marketing orders. /d. § 608c(13)(B) (stating that no marketing

° A handler is a person who purchases milk from a producer in an

unprocessed form for the purpose of processing it.

13a

order “shall be applicable to any producer in his capacity as a

producer”).

Although milk marketing orders restrict the decisions of

dairy handlers, they do not interfere with the decisions of

dairy producers, such as the Cochrans, with regard to how

much milk to produce, sell or whether they must sell milk at

all to dairy handlers. See id. § 608c(5).’ At least 25 percent

of the milk sold in the United States is sold outside of federal

milk marketing orders. The Cochrans are able to and do sell

much of their milk outside any milk marketing order.

The Agricultural Act of 1949, 7 U.S.C. § 1446, establishes

a price support program wherein manufacturers and proces-

sors of cheese, nonfat dry milk and butter can sell those

products to the federal government as buyer of last resort.

Producers of fluid milk, such as the Cochrans, however, are

not covered by the Agricultural Act and are not permitted to

sell their product to the government under the price support

program.

Similarly, the import control regulations under Chapter 4

of the Harmonized Tariff Schedule of the United States, 19

U.S.C. § 1202, subject a multitude of commodities and prod-

” Milk marketing orders under the AMAA are implemented on a

regional basis. See 7 U.S.C. § 608c(11). Not all parts of the country are

covered, and some states—including California, Virginia, Maine and

Montana—are outside the territory of any milk marketing order. Portions

of Pennsylvania fall within two different milk marketing regions, the

Northeast Area and the Mideast Area. See 7 C.F.R. §§ 1001.1, 1033.1.

Certain portions of the state, however, including where the Cochrans are

located, fall outside of any federal milk marketing order. The effect of the

AMAA provisions is that any particular producer’s milk is subject to a

marketing order only if the producer chooses to sell to a regulated handler

in an area covered by a marketing order. See id. §§ 1001.13, 1033.13.

l4a

ucts to annual import quotas. Although certain dairy products

are included - namely butter, dry milk and cheese—fluid milk

is not. See 7 C.F.R. Pt. 6, Apps. 1, 2, 3.

OO i

Finally, the Capper-Volstead Act, 7 U.S.C. § 291, permits

producers of agricultural products—-including milk, mush-

rooms and others - to enter into manufacturing and marketing

cooperatives without fear of violating antitrust laws. It does

not, however, require producers to enter into such coopera-

tives, as federal law expressly protects producers’ freedom

not to join any cooperative. See Agricultural Fair Practices

Act of 1967, 7 U.S.C. § 2301 et seg.; Michigan Canners &

Freezers Ass’n, Inc. v. Agric. Mktg. & Bargaining Bd., 467

U.S. 461, 477-478, 81 L. Ed. 2d 399, 104 S. Ct. 2518 (1984).

The Cochrans do not belong to any cooperatives protected by

the antitrust exemption created by the Capper-Volstead Act.

Considering the foregoing provisions of the Dairy Act and

other statutes governing the dairy industry, we now turn to

the First Amendment issues that constitute the heart of this

appeal.*

IV.

We must first consider whether the compelled assessments

generated under the Dairy Act constitute private or govern-

ment speech. Although the district court did not address this

®The United States District Court for the Middle District of

Pennsylvania had jurisdiction pursuant to 28 U.S.C. § 1331 based on the

Cochrans’ First Amendment claim. We have jurisdiction in this timely

appeal pursuant to 28 U.S.C. §§ 1291. We review de novo the constitu-

tionality of an Act of Congress. Dyszel v. Marks, 6 F.3d 116, 123 (3d Cir.

1993). Similarly, our review of the district court’s granting of judgment

on the pleadings and summary judgment is plenary. Anker Energy Corp.

v. Consolidation Coal Co., 177 F.3d 161, 169 (3d Cir. 1999).

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15a

issue, the Government contended before the district court that

the expressions generated under the Dairy Act constitute

government- speech. Therefore, the issue is subject to our

review.

The First Amendment prohibits the government from

regulating private speech based on its content, but the 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.” Rosenberger v. Rector & Visitors of the Univ.

of Virginia, 515 U.S. 819, 833, 132 L. Ed. 2d 700, 115 S. Ct.

2510 (1995). -

The Court has not decided whether speech generated under

commodity promotion laws such as the Dairy Act constitutes

government speech and is thereby immune from First

Amendment scrutiny.” But in Frame, this court did meet the

issue, 885 F.2d at 1132-1133.

In line with our sister Courts of Appeals in Michigan Port

Producers Ass’n, Inc. v. Veneman, 348 F.3d 157, 161-162

(6th Cir. 2003) and Livestock Marketing Ass'n v. U.S. Dep't

of Agric., 335 F.3d 711, 720 (8th Cir. 2003), we held that the

Beef Promotion Program 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. Frame,

885 F.2d at 1132-1133. Recognizing that the Beef Promotion

Program directed the Secretary to appoint all Cattlemen

Board members and approve all budgets, plans, contracts and

projects entered into by the Board, this court nevertheless

* The two decisions of the Court involving commodity promotion

programs do not address the issue of government speech. In Glickman, the

Secretary of Agriculture waived the issue by not pursuing it before the

Supreme Court. 521 U.S. at 482 n.2 (Souter, J., dissenting). In United

Foods, the Court refused to address the issue because the government

failed to raise it before the Court of Appeals. 533 U.S. at 416-417.

l6a

concluded that “[t]he Secretary’s extensive supervision . . .

does not transform this self-help program for the beef

industry into ‘government speech.’ We explained:

The Cattlemen’s Board seems to be an entity “repre-

sentative of one segment of the population, with certain

common interests.” Members of the Cattlemen’s Board

and the Operating Committee, though appointed by the

Secretary, are not government officials, but rather,

individuals from the private sector. The pool of nomi-

nees from which the Secretary selects Board members,

moreover, are determined by private beef industry

organizations from the various states. Furthermore, the

State organizations eligible to participate in Board

nominations are those that “have a history of stability

and permanency,” and whose “primary or overriding

purpose is to promote the economic welfare of cattle

producers.”

Id. at 1133 (quoting 7 U.S.C. § 2905(b)(3) & (4)). The gov-

ernment’s role in the Dairy Promotion Program is in all

material respects the same as it was in the Beef Promotion

Program, 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 “gov-

ernment speech.” On the dairy checkoff website, the

government itself describes the Dairy Promotion Program as

a non-governmental program, financed and directed by dairy

farmers.

Although this court’s First Amendment discussion and

ultimate holding in Frame have been abrogated by Glickman

and United Foods, none of the Court’s subsequent decisions

regarding “government speech” undermine our analysis of

that issue in Frame.'° Accordingly, we conclude that this is a

'° Notwithstanding the Government’s assertions to the contrary, we are

not convinced that any decisions rendered by the Court in the years

following our decision in Frame require us to cast aside the government

tice

17a

private speech case, and thus is not immune from First

Amendment scrutiny.

The teachings of United Foods require us to decide

whether the dairy producers are “bound together and required

by the statute to market their products according to

cooperative rules[,]” 533 U.S. at 412, for purposes other than.

advertising, or speech. That is our next task.

The Cochrans contend that the Dairy Act violates their

First Amendment free speech and association rights by com-

pelling them to subsidize generic advertising that promotes

milk produced by methods they view as wasteful and harmful

to the environment.

The First Amendment protects the nght to refrain from

speaking and the right to refrain from association. See, e.g.,

Wooley, 430 U.S. at 714. Moreover, the government may not

compel individuals to fund speech or expressive associations

with which they disagree. See United Foods, 533 U.S. at 411.

“First Amendment values are at serious risk if the govern-

speech analysis we performed in Frame. See Legal Servs. Corp. v. |

Velazquez, 531 U.S. 533, 149 L. Ed. 2d 63, 121 S. Ct. 1043 (2001)

(concluding that restrictions placed on the private speech of a lawyer

receiving government funding from the Legal Services Corporation were

unconstitutional); Bd. of Regents of the Univ. of Wis. Sys. v. Southworth,

529 U.S. 217, 146 L. Ed. 2d 193, 120 S. Ct. 1346 (2000) (stating in dicta,

in a case where the government affirmatively disavowed any connection

to the speech involved, that a government speech analysis might apply if a

state university used general tuition money to fund speech attributed to the

school or its administrators); Lebron v. Nat'l R.R. Passenger Corp., 513

U.S. 374, 130 L. Ed. 2d 902, 115 S. Ct. 961 (1995) (holding that Amtrak

is a government actor for First Amendment purposes because it was

created by statute to further government objectives and the government

maintained substantial control over its daily operations); Rust v. Sullivan,

500 U.S. 173, 114 L. Ed. 2d 233, 111 S. Ct. 1759 (1991) (concluding that

the government can prevent private doctors at family planning clinics that

receive federal funding from providing abortion counseling).

18a

ment can compel a particular citizen, or a discrete group of

citizens, to pay special subsidies for speech on the side that it

favors .. . . As a consequence, the compelled funding for the

advertising must pass First Amendment scrutiny.” /d. The

individual’s disagreement can be minor, as “[t]he general rule

is that the speaker and the audience, not the government,

assess the value of the information presented.” /d. (quoting

Edenfield v. Fane, 507 U.S. 761, 767, 123 L. Ed. 2d 543, 113

S. Ct. 1792 (1993)). When, however, regulation compelling

funding for speech is ancillary to a broader collective enter-

prise that otherwise restricts the individual’s market auton-

omy, it is considered “economic regulation,” which enjoys a

“strong presumption of validity” when facing a First Amend-

ment challenge. See Glickman, 521 U.S. at 477.

We conclude that in upholding as constitutional the

compelled subsidies under the Dairy Act, the district court

misapplied Glickman and misconstrued the effect of the

“entire regulatory scheme applicable to milk producers... .”

(District Court Op. at 15 n. 5.) The Court in United Foods

made clear that Glickman applied only in circumstances

similar to Abood and Keller—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 regula-

tion.” 533 U.S. at 412.

The 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.

}

ape iee

19a

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 collective enterprise or compelled

association with a non-speech purpose because theré is no

such enterprise or association for milk that encompasses all

dairy producers. Indeed, the AMAA provision for milk

marketing orders, which preexisted the Dairy Act, authorizes

the Secretary and marketing administrators to create dairy

promotional programs that literally would be ancillary to the

regulatory aspects of the milk marketing orders. See 7 U.S.C.

608c(5)(I). Congress chose not to utilize this precise

provision of the AMAA, however, and instead adopted an

entirely separate program which does not operate in concert

with any collective aspect of any milk marketing order.

Moreover, as independent small-scale dairy producers, the

Cochrans are exempted from the regional marketing orders

under the AMAA and have chosen not to enter into

manufacturing and marketing cooperatives. They, and they

alone, determine how much milk to produce, how to sell and

market it and to whom it will be sold. Nevertheless under the

Dairy Act they are compelled to pay assessments to subsidize

generic dairy advertising, a form of speech with which they

are in total disagreement. Cf. Glickman, 521 U.S. at 471

(noting that “none of the generic advertising conveys any

message with which respondents disagree”’).

Furthermore, 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

'' Congress’ declared policy of the Mushroom Act was

that it is in the public interest to authorize the establishment,

through the exercise of the powers provided in this chapter, of an

orderly procedure for developing, financing through adequate

assessments on mushrooms produced domestically or imported into

the United States, and carrying out, an effective, continuous, and

20a

under the mandatory assessments are for one purpose: generic

advertising.” United Foods, 533 U.S. at 412. 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.” /d. at 415.

We conclude, therefore, that being compelled to fund

advertising pursuant to the Dairy Act raises a First Amend-

ment free speech and associational rights issue. But our

determination that the Act’s compelled assessments for

generic advertising implicate the Cochrans’ First Amendment

rights does not end our inquiry. As this court held in Frame,

“[t}]he rights of free speech and association are not absolute.

Thus, we must next identify the proper standard for evaluat-

ing whether the statute . . . nevertheless passes constitutional

muster.” 885 F.2d at 1133."

cocrdinated program of promotion, research, and consumer and

industry information designed to—(1) strengthen the mushroom

industry's position in the marketplace; (2) maintain and expand

existing markets and uses for mushrooms; and (3) develop new

markets and uses for mushrooiis.

7 U.S.C. § 6101(b). Congizs: declared purpose for the Dairy Act is

that it is in the public interest to authorize the establishment . . . of

an orderly procedure for financing (through assessments on all milk

produced in the United States for commercial use and on imported

dairy products) and carrying out a coordinated program of promo-

tion designed to strengthen the dairy industry's position in the

marketplace and to maintain and expand domestic and foreign

markets and uses for fluid milk and dairy products.

7 U.S.C. § 4501(b).

'? Upon concluding that milk producers are regulated to a similar

degree as the California tree fruit growers in Glick-man, the district court

applied a three-part test set forth by the Supreme Court in Glickman:

(1) whether the Act imposes a restraint on the freedom to communicate;

(b) whether the Act compels any person to engage in any actual or

symbolic speech; (c) whether the Act compels dairy producers to endorse

2la

VL.

This case is properly characterized as a compelled com-

mercial speech case. See United Foods, 533 U.S. at 410;

Frame, 885 F.2d at 1146 (Sloviter, J., dissenting). The Su-

preme Court, however, has left unresolved the standard for

determining the validity of laws compelling commercial

speech, and the circuit courts are divided on the issue. There

are at least four variations in the judiciary’s cumulative

experience. One is the more lenient standard applied to com-

mercial speech cases. See Central Hudson Gas & Elec. Corp.

v. Pub. Serv. Comm'n, 447 U.S. 557, 564, 65 L. Ed. 2d 341,

100 S. Ct. 2343 (1980). Another is the “germaneness” test of

compelled speech cases. See, e.g., Abood, 431 U.S. at 235-

236. Still another is an adaptation of the commercial speech

standard. See Livestock Marketing, 335 F.3d at 722-723. And,

in Frame, a pre-Glickman and pre-United Foods case, this

court applied the stringent level of scrutiny for associational

rights cases. 885 F.2d at 1134. We now summarize the

various standards.

In Central Hudson, the Supreme Court held that to evaluate

the constitutionality of regulatory restrictions on commercial

speech the Constitution requires only intermediate scrutiny—

namely, that (1) the state must “assert a substantial govern-

ment interest”; (2) “the regulatory technique must be in pro-

portion to that interest”; and (3) the incursion on commercial

speech “must be designed carefully to achieve the State’s

goal.” 447 U.S. at 564. Commercial speech is “expression

or finance any political or ideological views. (District Court Op. at 16-18.)

This test, however, is inappropriate because, like the Supreme Court in

United Foods, we have concluded that the Dairy Act is not a species of

economic regulation, as it is not ancillary to a more comprehensive

program restricting the marketing autonomy of dairy farmers. In United

Foods the Court did not apply this three-part test. Nor do we.

22a

related solely to the economic interests of the speaker and its

audience.” /d. at 561.

But the Court has left open the question of whether Central

Hudson’s more relaxed First Amendment test applies to cases

involving compelled commercial speech. In United Foods the

Court stepped back from addressing the issue in ipsis verbis,

explaining: “the Government itself does not rely upon Central

Hudson to challenge the Court of Appeals’ decision, . . . and

we therefore do not consider whether the Government's

interest could be considered substantial for purposes of the

Central Hudson test.” 533 U.S. at 410. Nevertheless, in the

earlier case of Glickman, the Court questioned the application

of the commercial! speech test to compelled speech cases:

The Court of Appeals fails to explain why the Cenitral

Hudson test, which involved a restriction on commercial

speech, should govern a case involving the compelled fund-

ing of speech. Given the fact that the Court of Appeals relied

on Abood for the proposition that the program implicates the

First Amendment, it is difficult to understand why the Court

of Appeals did not apply Abood’s “germaneness” test.

521 U.S. at 474 n. 18.

Indeed, in United Foods, notwithstanding its specific

disclaimer regarding Central Hudson, the Court seemingly

applied the “germaneness” test:

The only program the Government contends the com-

pelled contributions serve is the very advertising scheme

in question. Were it sufficient to say speech is germane

to itself, the limits observed in Abood and Keller would

be empty of meaning and significance. The cooperative

marketing structure relied upon by a majority of the

Court in Glickman to sustain an ancillary assessment

finds no corollary here; the expression respondent is

required to support is not germane to a purpose related to

an association independent from the speech itself; and

the rationale of Abood extends to the party who objects

23a

to the compelled support for this speech. For these and

other reasons we have set forth, the assessments are not

permitted under the First Amendment.

533 U.S. at 415-416 (emphasis added).

As we previously explained, the purpose of the Dairy Act

is in all material respects the same as that of the Mushroom

Act at issue in United Foods, and the Dairy Act is not

ancillary to a broader cooperative marketing regime like

the fruit tree marketing orders at issue in Glickman. The

compelled assessments for generic dairy advertising under the

Dairy Act are germane to nothing but the speech itself.

“fA]lmost ali of the funds collected under the mandatory

assessments are for one purpose: generic advertising.” /d. at

412. It would thus seem that the Dairy Act would not survive

Abood’s germaneness test.

Other courts have applied the germaneness test to cases

involving compelled assessments pursuant to promotional

programs and have rejected the application of Central

Hudson. See, e.g., Michigan Port, 348 F.3d at 163 (noting

that “[e]ven assuming that the advertising funded by the

{Pork] Act is indeed commercial speech, the more lenient

standard of review applied to limits on commercial speech

has never been applied to speech—commercial or other-

wise—that is compelled”); In re Washington State Apple

Adver. Comm'n, 257 F. Supp. 2d 1274, 1287 (E.D. Wash.

2003) (concluding that “[b]ecause the Commission’s assess-

ments do not restrict speech, it is inappropriate to apply the

Central Hudson test for restrictions on commercial speech”).

In Livestock Marketing, however, the Eighth Circuit

concluded that an adaptation of the Central Hudson test

applied, explaining that “Central Hudson and the case at bar

both involve government interference with private speech in a

commercial context.” 335 F.3d at 722. All the same, the court

concluded that the Beef Act did not survive the intermediate

scrutiny of Central Hudson. /d. at 725-726. Relying on the

24a

reasoning set forth in United Foods, the court determined that

the beef checkoff program is in all material respects identical

to the mushroom checkoff program, and concluded that “the

government’s interest in protecting the welfare of the beef

industry by compelling all beef producers and importers to

pay for generic beef advertising is not sufficiently substantial

to justify the infringement on appellees’ First Amendment

free speech right.” Jd.

Finally, in Frame, which was decided before the teachings

of both Glickman and United Foods, this court applied the

stringent associational rights standard but nevertheless upheld

the constitutionality of the Beef Act, 7 U.S.C. § 2901 et seq.

Back in 1989, this court concluded that the government’s

interest in “maintaining and expanding beef markets proves

. . . compelling[,]” and “[m]aintenance of the beef industry

ensures preservation of the American cattlemen’s traditional

way of life.” Frame, 885 F.2d at 1134-1135 (citations

omitted).

Judge Sloviter, however, dissented on this issue in Frame:

I doubt that the type of compelled speech at issue here

can be justified on any basis. Nonetheless, I do not reach

the majority’s stringent associational rights standard be-

cause I believe that no justification can be found, even

under the less exacting criteria adopted by the Supreme

Court in evaluating the permissibility of regulation of

commercial speech [in Central Hudson] . . . . While the

government has a general interest in the health of the

beef industry, it does not follow that the government has

a substantial interest in compelling the beef industry to

make and support such a promotion campaign. Instead,

... the messages represent the economic interests of one

segment of the population ....

Id. at 1146-1147 (Sloviter, J., dissenting) (citations and

internal quotations omitted).

CES iat Mea aD hate Dio te

25a

As in Frame, the Government here argues that it has a

sufficient interest in increasing the demand for an agricultural

product. Moreover, the Government contends that it has an

interest in decreasing its obligation to purchase dairy products

under the price support program, 7 U.S.C § 1446. We previ-

ously have emphasized, however, that the Court’s subsequent

holding in United Foods that clarified and limited the

teachings of Glickman, cut away the underpinning of this

court’s analysis in Frame. United Foods makes clear that the

government may not compel individuals to support an adver-

tis'ng program for the sole purpose of increasing demand for

at product. 533 U.S. at 415. In United Foods, the Court

concluded that the Mushroom Act’s compelled suosidies

would be unconstitutional even under the lesser scrutiny

accorded to commercial speech. /d. at 410.

Although the Government’s contention that it has a sub-

stantial interest in decreasing its obligation under the dairy

price support program is somewhat unique from the govern-

ment interest asserted in United Foods, this interest is

undermined by the fact that as a stand-alone statute, the Dairy

Act does not operate in conjunction with the price support

program. Indeed, producers of liquid milk such as the

Cochrans are not covered by the support program. Moreover,

reductions in the government’s obligations under the price

support program are insignificant to the Dairy Promotion

Program’s existence, as whether the compelled assessments

continue is controlled by the dairy producers via the referen-

dum process. 7 U.S.C. § 4506(a).

We conclude, therefore, that the government’s interest in

promoting the dairy industry is not sufficiently substantial to

justify the infringement on the Cochran’s First Amendment

free speech and association rights. As Judge Sloviter sug-

gested in her dissent in Frame, promotional programs such as

the Dairy Act seem to really be special interest legislation on

behalf of the industry’s interest more so than the govern-

26a

ment’s. We believe that the Supreme Court reached the same

conclusion by ruling in United Foods that the compelled

assessments pursuant to the Mushroom Act are not permitted

by the First Amendment.

In light of the reluctance of the Supreme Court in United

Foods to enter the controversy over the applicable scrutiny

for compelled commercial speech cases, however, we will

follow suit. “[W]e find no basis under either Glickman or our

other precedents to sustain the compelled assessments sought

in this case.” 533 U.S. at 410.'°

The compelled assessments for generic dairy advertising

under the Dairy Act relate to speech and only to speech.

Indeed, “almost all of the funds collected under the manda-

tory assessments are for one purpose: generic advertising.”

Id. at 412.

Measured by any degree of scrutiny set forth in the

foregoing discussion, we conclude that this case runs on all

fours with the teachings and holding of United Foods, and

accordingly hold that the Dairy Promotion Stabilization Act

of 1983 does not survive the First Amendment challenge

lodged by Appellants Joseph and Brenda Cochran. The

district court erred in sustaining the constitutionality of the

Dairy Act on the basis of Glickman.

**e eke *

In sum, we conclude that the generic advertising pursuant

to the Dairy Promotion Stabilization Act of 1983 does not

constitute government speech and is therefore subject to First

Amendment scrutiny. We hold that the Dairy Act violates the

Cochrans’ First Amendment free speech and associational

'? We reach this conclusion whether accepting the standard explicitly

expressed in Frame or deciding that in view of the Court’s discussion in

United Foods, that standard is not longer controlling.

27a

rights. Although the dairy industry may be subject to a

labyrinth of federal regulation, the Dairy Act is a stand-alone

law and the compelled assessments for generic dairy advertis-

ing are not germane to a larger regulatory purpose other than

the speech itself.

The judgment of the district court sustaining the consti-

tutionality of the Dairy Promotion Stabilization Act of 1983

will be reversed and the proceedings remanded with a

direction to enter a decree in favor of Appellants in accor-

dance with the foregoing.

CONCURBY: TRENDELL

CONCUR: TRENDELL, Circuit Judge, concurring.

I join in our opinion and judgment but write separately to

not pass muster under the Supreme Court’s analysis in United

Foods, and, having noted at the end of Pat IV that the

compelled subsidies were assessed to support a program

whose principal object was speech itself, we need not engage

in the exercise of determining the “standard” regarding the

extent of the government’s interest for purposes of a commer-

cial speech analysis under Central Hudson, as the opinion

does at Part VI-A. Twice—in both Glickman and United

Foods—the Supreme Court has questioned the need for

engaging in a Central Hudson analysis.'* And, I think it

'* The Court has not treated these cases as involving a discrete com-

mercial speech issue, instead indicating that “[t]he question is whether the

government may underwrite and sponsor speech with a certain viewpoint

using special subsidies exacted from a designated class of persons, some

of whom object to the idea being advanced.” United Foods, 533 U.S. at

410; see also id. (stating that, even if commercial speech is less protected

than other speech, there is “no basis under either Glickman or our other

precedents to sustain the compelled assessments,” but refusing to consider

“whether the Government’s interest could be considered substantial for

purposes of the Central Hudson test”); Glickman, 521 U.S. at 474 & n.18

(noting that it was “error for the [Ninth Circuit] to rely on Central Hudson

28a

unnecessary to apply Central Hudson in light of the Court’s

analysis in United Foods. '°

In United Foods the Court distinguished the situation it

faced from the one it considered in Glickman by examining

the following question: Is the challenged assessment part of a

“broader regulatory system” that does not have speech as its

primary object. 533 U.S. at 415. There appear to be two parts

to this basic inquiry. First, are the plaintiffs part of a group

that is “bound together and required . . . to market their

products according to cooperative rules?” /d. at 412.

for the purpose of testing the constitutionality of market order assessments

for promotional advertising,” and stating that the Ninth Circuit “fails to

explain why the Central Hudson test, which involved a restriction on

commercial speech, should govern a case involving the compelled funding

of speech”). In fact, in United Foods the Court appears to explicitly

endorse the applicability of the Abood/Keller germaneness test: “It is true

that the party who protests the assessment here is required simply to

support speech by others, not to utter the speech itself. We conclude,

however, that the mandated support is contrary to the First Amendment

principles set forth in cases involving expression by groups which include

persons who object to the speech, but who, nevertheless, must remain

members of the group by law or necessity.” 533 U.S. at 413 (citing Abood

and Keller).

'' The Sixth Circuit, in Michigan Port Producers Ass'n, Inc. v.

Veneman, 348 F.3d 157 (6th Cir. 2003), also rejected the application of

the Central Hudson test to an assessment created by a similar promotional

program. I find that court’s comments on this matter to be instructive:

“(W]e find inapplicable to this case the relaxed scrutiny of commercial

speech analysis provided for by Central Hudson, and relied upon by

Appellants. The Pork Act does not directly limit the ability of pork

producers to express a message; it compels them to express a message

with which they do not agree. Even assuming that the advertising funded

by the Act is indeed commercial speech, the more lenient standard of

review applied to limits on commercial speech has never been applied to

speech—commercial or otherwise—that is compelled. It is one thing to

force someone to close her mouth; it is quite another to force her to

become a mouthpiece.” /d. at 163 (citation omitted).

29a

Second, is the assessment regulation related to and in fur-

therance of other nonspeechpurposes, carrying out other —

aspects to further other economic, societal, or governmental

goals? Id. at 415. Even if the answer to the first question is

“no,” the assessment might nonetheless be permitted if it is

not only related to speech. This second inquiry could signal

consideration of “germaneness” if, in fact, other goals were

implicated. But here, we answered “no” to both questions: we

decided that the Cochrans did not surrender their freedom to

make independent competitive choices to any collective

enterprise, and we concluded that speech was the only

purpose of the Dairy Act. Thus, it was purely “compelled

speech,” forbidden by United Foods under any level of

scrutiny. 533 U.S. at 410. In fact, after discussing the various

standards potentially applicable here, Judge Aldisert clearly

states in the ensuing Part VI-B that under any level of

scrutiny, the asséssments for speech only do not pass

constitutional muster given United Foods. The analysis in

Part VI-A regarding the proper level of scrutiny is therefore

unnecessary, and, I believe, dicta.

30a

APPENDIX B

UNITED STATES DISTRICT COURT FOR THE

MIDDLE DISTRICT OF PENNSYLVANIA

No. 4:CV-01-0529

JOSEPH P. COCHRAN, ef al.,

Plaintiffs,

ANN VENEMAN, ef al.,

Defendants,

and FRED LOVELL, et al.,

Intervenor Defendants.

March 24, 2003, Decided

OPINION

This is a declaratory judgment action brought pursuant to

28 U.S.C. §§ 2201 and 2202 and Federal Rule of Civil

Procedure 57 by Plaintiffs Joseph S. Cochran and Brenda S.

Cochran (“Plaintiffs” or “the Cochrans”). Plaintiffs seek a

declaratory judgment ruling that the Dairy Promotion and

Research Program (“the Dairy Program”) as set forth in Title

I, Subtitle B of the Dairy Promotion Stabilization Act of 1983

(“the Stabilization Act” or “the Act”), Pub. L. 98-180, 97

Stat. 1128, 7 U.S.C. § 4504(g) is an unconstitutional restric-

tion on their right to free speech. Plaintiffs also seek an

injunction against Ann Veneman, Secretary of the United

States Department of Agriculture (“the Secretary”) and the

National Dairy Promotion and Research Board (“the Dairy

Board”) (together, “the Governmental Defendants”), enjoin-

ing the continued collection of the dairy checkoff assessment

created pursuant to the Act.

3la

Some of the advertisements funded by assessments

collected pursuant to the provisions of the Stabilization Act

currently under attack by Plaintiffs are part of the Milk

Mustache/got milk? (R) campaign. The question presented to

the Court, phrased in an equally ungrammatical fashion, may

be reduced to: “Got Advertising Money for Milk?”.

For the reasons that follow, we conclude that the Dairy

Program and resulting diary checkoff assessment are not

unconstitutional. Our holding will allow the American public

to continue to view advertisements containing white mus-

tachioed celebrities and other pop culture icons depicting the

salutary effects of milk.

PROCEDURAL HISTORY:

Plaintiffs are dairy producers engaged in the production of

milk for commercial use on a dairy farm located in

Pennsylvania. They initiated this action by filing a complaint

for declaratory and injunctive relief against the Governmental

Defendants on April 2, 2002. The case. was assigned to the

Honorable James F. McClure Jr.

On June 6, 2002, Plaintiffs filed a motion for summary

judgment. Thereafter, on June 14, 2002, the Governmental

Defendants filed a motion to dismiss, or in the alternative, for

summary judgment.

By Order issued August 6, 2002, this matter was trans-

ferred to the undersigned.

- On January 13, 2003, this Court granted the Petition to

Intervene brought by Fred Lovell, Lee Greenwalt, Jackie

Root, Earnest Norman, Stephen Marshall, Cecil Moyer, and

James Vandblarcom (“the Intervening Parties” or “the

Intervenors”) on June 14, 2002. The Intervening Parties are

dairy producers who, unlike Plaintiffs, support the dairy

checkoff provision within the Act and believe it to be

constitutional in all respects.

32a

On January 21, 2003, the Intervening Parties filed their

own motion for summary judgment.

Each of the pending motions has been fully briefed by the

parties. Oral argument was held on March 19, 2003. This

matter is now ripe for disposition.

STANDARD OF REVIEW:

Summary judgment is appropriate if “there is no genuine

issue as to any material fact and . . . the moving party is

entitled to judgment as a matter of law.”' F.R.C.P. 56(c); see

also Turner v. Schering-Plough Corp., 901 F.2d 335, 340 (3d

Cir. 1990). The party moving for summary judgment bears

the burden of showing “there is no genuine issue for trial.”

Young v. Quinlan, 960 F.2d 351, 357 (3d Cir. 1992).

Summary judgment should not be granted when there is a

disagreement about the facts or the proper inferences which a

fact finder could draw from them. Peterson v. Lehign Valley

Dist. Council, 676 F.2d 81, 84 (3d Cir. 1982).

Initially, the moving party has a burden of demonstrating

the absence of a genuine issue of material fact. Celotex

Corporation v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265,

106 S. Ct. 2548 (1986). This burden may be met bv the

moving party pointing out to the court that there is an absence

of evidence tu support an essential element as to which the

non-meving party will bear the burden of proof at trial. /d.

at 325.

Rule 56 provides that, where such a motion is made and

—properly supported, the non-moving party must then show by

' We note that the Governmental Defendants filed a motion to dismiss

or, in the alternative, one for summary judgment. Because the Govern-

mental Defendants presented matters outside of the pleadings for the

Court’s consideration within their motion, we will treat the motion as one

for summary judgment under Federal Rule of Civil Procedure 56. See

Fed.R. Civ.P. 12(b).

33a

affidavits, pleadings, depositions, answers to interrogatories,

and admissions on file, that there is a genuine issue for trial.

Fed. R. Civ. P. 56(e). The United States Supreme Court has

commented that this requirement is tantamount to the non-

moving party making a sufficient showing as to the essential

elements of their case that a reasonable jury could find in its

favor. Celotex Corporation v. Catrett, 477 U.S. 317, 322-23,

91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986).

It is important to note that “the non-moving party cannot

rely upon conclusory allegations in its pleadings or in

memoranda and briefs to establish a genuine issue of material

fact.” Pastore v. Bell Tel. Co. of Pa., 24 F.3d 508, 511 (3d

Cir. 1994) (citation omitted). However, all inferences “should

be drawn in the light most favorable to the non-moving party,

and where the non-moving party’s evidence contradicts the

movant’s, then the non-movant’s must be taken as true.” Big

Apple BMW, Inc. v. BMW of North America, Inc., 974 F.2d

1358, 1363 (3d Cir. 1992) (citations omitted).

“The mere existence of some alleged factual dispute

between the parties will not defeat an otherwise properly

supported motion for summary judgment; the requirement is

that there be no genuine issue of material fact.” Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 247-48, 91 L. Ed. 2d 202,

106 S. Ct. 2505 (1986). “As to materiality, the substantive

law will identify which facts are material.” Jd. at 248. Fur-

thermore, a dispute is genuine only if “the evidence is such

that a reasonable jury could return a verdict for the

nonmoving party.” /d. camper ata Sh

STATEMENT OF RELEVANT FACTS:

The history of government involvement in the regulation of

milk is an extensive one. “Federal programs have been deeply

imbedded in the economic fabric of the United States dairy

industry” since the late 1930s. S. Rep. No. 98-163, 13,

reprinted in 1983 U.S.C.C.A.N. 1658, 1670.

34a

There are four clearly interrelated federal programs

involved:

1. The dairy price support program which explicitly puts

a fluor under the price of manufacturing grade milk and

thus maintains a floor under all milk prices.

2. The milk marketing order program which establishes

minimum prices for fluid grade milk in most parts of the

country.

3. Import controls which protect the price support

program and keep the U.S. government from supporting

world milk prices. |

4. Federal cooperative policy which encourages the

development of farmer-owned cooperatives but provides

they may not use their market power to raise prices

excessively.

Id. “The thrust of these programs has been to deal with the

level of milk prices and with problems of instability in milk

prices and dairy farm incomes.” /d.

Ia 1983, upon finding that “dairy products are basic foods

that are a valuable part of the human diet,” that “the

production of dairy products plays a significant role in the

Nation’s economy,” that “dairy products must be readily

availabie and marketed efficiently to ensure that the people of

the United States receive adequate nourishment,” and that

“the maintenance and expansion of existing markets for dairy

products are vital to the welfare of milk producers and those

concerned with marketing, using, and producing dairy

products, as well as to the general economy of the Nation,”

Congress created the Dairy Promotion Program. 7 U.S.C.

§§ 4501(a)(i}-(4). In so doing, Congress declared

that it is ‘n the public interest to authorize the estab-

lishment, .arough the exercise of the powers provided

herein, of an orderly procedure for financing (through

35a

assessments on all milk produced in the United States

for commercial use and on imported dairy products) and

carrying out a coordinated program of promotion de-

signed to strengthen the dairy industry’s position in the

marketplace and to maintain and expand domestic and

foreign markets and uses for fluid milk and dairy

products.

7 U.S.C. § 4501(b).

In accordance with the guidelines set forth within the

Stabilization Act, see 7 U.S.C. § 4505(b)(1), the Dairy Board

was established by an order (“the Dairy Order”) issued by the

Secretary. See 7 C.F.R. § 1150.131(a). Currently, the Dairy

Board consists of 36 milk producers, each appointed by the

Secretary. See 7 C.F.R. § 1150.131(a), 7 C.F.R. § 1150.135;

see also 7 U.S.C. § 4504(b)(2). Vacancies on the Dairy Board

“occasioned by the death, removal, resignation, or disquali-

fication of any member” are filled by the Secretary from a list

of nominations made by the Board. 7 C.F.R. § 1150.136.

The powers of the Dairy Board are limited to those

enumerated within the Stabilization Act. See 7 U.S.C.

§ 4504(c). Included among those enumerated powers are the

authority to “administer the provisions of [the Dairy Order]

in accordance with its terms and conditions,” 7 C.F.R.

1150.139(b); see also 7 U.S.C. § 4504(c)(2), and to

receive and evaluate, or on its own initiative develop,

and budget for plans or projects to promote the use of

fluid milk and dairy products as well as projects for

research and nutrition education and to make recom-

mendations to the Secretary regarding such proposals.

7 C.F.R. § 1150.139(a); see also 7 U.S.C. § 4504(c)(1). The

Act provides that the Dairy Board will “provide for the

establishment and administration of appropriate plans or

projects for advertisement and promotion of the sale and

consumption of dairy products, for research projects related

36a

thereto, for nutrition education projects, and for the

disbursement of necessary funds for such purposes.” 7 U.S.C.

§ 4505(a). Advertising created by the Dairy Board must be

approved by the Agricultural Marketing Service (“AMS”),

the division of the Department of Agriculture to which the

Secretary has assigned this congressionally delegated role.

(Gov. Defs.’ Br. Supp. Summ. J., Ex. A at 1 and P VII(B)).

Of particular relevance to the case at bar, the Stabilization

Act contains a provision for assessments which are to be

issued to milk producers and thereafter paid to the Dairy

Board:

(g) Assessments

(1) The order shall provide that each person making

payment to a producer for milk produced in the

United States and purchased from the producer shall.

in the manner as prescribed by the order, collect an

assessment based upon the number of hundredweights

of milk for commercial use handled for the account of

the producer and remit the assessment to the Board.

(2) The assessment shall be used for payment of the

expenses in administering the order, with provision

for a reasonable reserve, and shall include those

administrative costs incugred by the Department after

an order has been promulgated under this subchapter.

(3) The rate of assessment for milk produced in the

United States and imported dairy products prescribed

by the order shall be 15 cents per hundredweight of

milk for commercial use or the equivalent thereof, as

determined by the Secretary.

(4) A milk producer or the producers’ cooperative

who can establish that the producer is participating in

active, ongoing qualified State or regional dairy

product promotion or nutrition education programs

37a

intended to increase consumption of milk and dairy

products generally shall receive credit in determining

the assessment due from such producer for contri-

butions to such programs of up to 10 cents per

hundredweight of milk marketed or, for the period

ending six months after November 29, 1983, up to the

aggregate rate in effect on November 29, 1983, of

such contributions to such programs (but not to

exceed 15 cents per hundredweight of milk marketed)

if such aggregate rate exceeds 10 cents per hun=

dredweight of miik marketed.

(5) Any person marketing milk of that person’s own

production directly to consumers shall remit the as-

sessment directly to the Board in the manner

prescribed by the order.

7 U.S.C. § 4504(g). The Secretary issued an order in ac-

cordance with the Stabilization Act adopting the substance of

the provisions listed above. See C.F.R. § 1150.152(a), (b)

(requiring producers of milk to pay an assessment of 15 cents

to the Dairy Board of reach hundredweight of milk marketed

commercially). It is these provisions of the Act whose

constitutionality are currently under review.

The Dairy Board is empowered to use funds collected

through the assessments in order to fulfill its obligations

under the Act. See 7 U.S.C. § 4504(f); see also 7 C.F.R.

§ 1150.140(i). None of these funds may, however, be utilized

“in any manner for the purpose of influencing governmental

policy or action” except insofar as those funds are used to

make recommendations to the Secretary regarding proposed

amendments to the Dairy Order. See 7 U.S.C. § 4504(j); see

also 7 C.F.R. § 150.154.

In 1994, the Dairy Board joined with the United Dairy

Industry Association (“UDIA”), a federation of Qualified

Programs, in order to create Dairy Management Inc.

38a

(“DMI”), a District of Columbia corporation. (Gov. Defs.’ Br.

Supp. Summ. J., Ex. C P 1). The Dairy Board and UDIA

“develop[] their marketing plans and programs through

DMI.” (Gov. Defs.’ Br. Supp. Summ. J., Ex. B at 9). The

DMI Board consists of an equal number of dairy farmers

from the Dairy Board and the UDIA Board. /d. “The goals of

DMI are to reduce administrative costs, to have a larger

impact on the consumer, and to be better able to drive

demand and help increase human consumption of fluid milk

and dairy products.” /d. All advertising created by DMI

requires the approval of Dairy Programs, a component of

AMS, prior to its dissemination to the public. See Mengel

Decl. PP 2-3.

Plaintiffs operate a dairy farm in Tioga County, Penn-

sylvania,> where they produce milk for commercial use. They

are subject to the Dairy Program’s assessment, which costs

them approximately $3,500 to $4,000 per year. See Cochran

Decl. P 8.

The Cochrans operate their dairy farm autonomously using

traditional farming methods. They are not members of any

dairy cooperative. See Compl. P 25. They believe “that the

use of sustainable agriculture in the form of less intensive

? In the year 2000, DMI’s program of generic promotion included “a

full year of fluid milk print advertising through the Milk Mustache/got

milk? (R) campaign.” (Gov. Defs.’ Br. Supp. Summ. J., Ex. B at 21).

* A total of eleven federal marketing orders exist for milk. (Gov. Defs.’

Br. Supp. Summ. J., Ex. L at 1). Plaintiffs emphasize, however, that Tioga

County is not covered by a milk marketing order. See Compl. at P 6; see

also 7 C.F.R. §§ 1001.2, 1033.2.

Still, the fact remains that “handlers regulated under federal milk

orders process about 75 percent of all the milk marketed in the U.S.”

(Gov. Defs.’ Br. Supp. Summ. J., Ex. K at 2). Indeed, “in total, more than

96 percent of the fluid eligible milk produced in the United States is

priced under a state or federal marketing order.” Second Mengel Decl.

P 2.

39a

herd management and grazing system makes for a superior

milk, promotes a better use of the resources, promotes the

environment, and, in sum, provides a healthier product for

humans and our planet.” Cochran Decl. P 10. Based upon the

perceived differences in the farming methods used by the

Cochrans and dairy producers at-large, the Cochrans object to

the promotion of milk generically as “speech that denies there

is any difference in milk.” /d. P 13.

LEGAL ANALYSIS

Our holding hinges upon a determination of whether the

facts in this case more closely parallel those in Glickman v.

Wileman Bros & Elliott, 521 U.S. 457, 138 L. Ed. 2d 585,

117 S. Ct. 2130 (1997), or in United States v. United Foods,

Inc., 533 U.S. 405, 150 L. Ed. 2d 438, 121 S. Ct. 2334

(2001).

In Wileman, producers of California tree fruits (including

nectarines, plums, and peaches) challenged the constitutional-

ity of regulations contained in marketing orders promulgated

by the Secretary of Agriculture which imposed assessments

on the producers to cover costs associated with the orders,

including generic advertising. See Wileman, 521 U.S. at 460.

The United States Supreme Court framed the issue before it

succinctly: “whether being compelled to fund this advertising

raises a First Amendment issue . . . to resolve, or rather is

simply a question of economic policy for Congress and the

Executive to resolve.” /d. at 468. In deciding upon the latter,

the Supreme Court placed emphasis upon the fact that

California nectarines and peaches are marketed pursuant

to detailed marketing orders that have displaced many

aspects of independent business activity that characterize

other portions of the economy in which competition is

fully protected by the antitrust laws. The business

entities that are compelled to fund the generic advertis-

ing at issue in this litigation do so as part of a broader

40a

collective enterprise in which their freedom to act

independently is already constrained by the regula-

tory scheme.

Id. at 469. In conjunction with the applicable statutory

scheme, the Court noted three critical characteristics about

the marketing orders in effect:

First, the marketing orders impose no restraint on the

freedom of any producer to communicate any message

to any audience. Second, they do not compel any person

to engage in any actual or symbolic speech. Third, they

-do not compel the producers to endorse or to finance any

political or ideological views.

Id. at 469-70. On these grounds, the Supreme Court con-

cluded that the regulation at issue would properly be judged

under the standard of review appropriate for economic regula-

tions rather than under the heightened scrutiny applicable to

First Amendment issues. /d. at 469-70.

Several terms later, in United Foods, the Supreme Court

considered a challenge to the constitutionality of a statute

mandating the issuance of assessments on handlers of fresh

mushrooms in order to fund advertising for their products.

See United Foods, 533 U.S. at 408. In finding that the First

Amendment was violated, the Supreme Court outlined the

fundamental difference between the facts before it in United

Foods and those before it in Wileman:

In [Wileman] the mandated assessments for speech were

ancillary to a more comprehensive program restricting

marketing autonomy. Here, for all practical purposes, the

advertising itself, far from being ancillary, is the

principal object of the regulatory scheme.

Id. at 411-12. More specifically, the Supreme Court observed

that the rationale of the holding in Wileman was premised

upon the fact that the nectarine and peach producers “were

bound together and required by the statute to market their

4la

products according to cooperative rules,” and that “their

mandated participation in an advertising program with a

particular message was the logical concomitant of a valid

scheme of economic regulation.” /d. at 412. In the case of

mushroom handlers, on the other hand, no comparable

regulatory scheme existed: there were no marketing orders in

place regulating the production and sale of mushrooms, no

exemption existed for mushroom producers from antitrust

laws, and no encroachments existed upon the ability

individual mushroom producers to make their own marketing

decisions. /d. at 412. In fact, the only regulations affecting

mushroom producers were the mandatory assessments which

were instituted for the sole purpose of creating and funding

generic advertising for mushrooms. /d. Therefore, the Court

concluded that there was no support for the proposition that

the compelled contributions for advertising were part of a

broader regulatory scheme whereby the statute would be

appropriately relegated to the standard of review applicable to

economic regulations as applied in Wileman.’ Id. at 415.

Instead, the Supreme Court analyzed the assessments under

the standard of review appropriate for First Amendment

issues and ultimately determined that the assessments were

impermissible intrusions upon the mushroom handlers’ First

Amendment rights. /d. at 416.

Based upon the aforementioned decades of regulations

affecting the milk industry and milk producers in particular,

we conclude that Section 4505(g) of the Stabilization Act is

part of a larger regulatory scheme affecting the sale and

* Quoting the Court of Appeals opinion in the case, the Supreme Court

recognized that “‘the mushroom growing business . . . is unregulated,

except for the enforcement of a regional mushroom advertising program,’

and ‘the mushroom market has not been collectivized, exempted from

antitrust laws, subjected to a uniform price, or otherwise subsidized

through price supports or restrictions on supply.’ United Foods, 533 U.S.

at 412 (quoting United States v. United Foods, Inc., 197 F.3d 221, 221,

223 (6th Cir. 1991)).

ESE SE

42a

production of milk.’ On this basis, we find that milk produc-

ers are regulated to a similar degree as were the tree fruit

growers in Wileman and that “the mandated assessments for

speech [are] ancillary to a more comprehensive program

restricting marketing autonomy.”® United Foods, 533 U.S.

at 411.

The remainder of our analysis will accordingly be devoted

to whether or not the provisions of the Stabilization Act

at issue in this case pass the three part test set out by

the Supreme Court in Wileman. See Wileman, 521 U.S. at

469-70.

a. Whether Section 4504(g) of the Stabilization Act im-

poses a restraint on the freedom to communicate.

Neither Section 4504(g) of the Stabilization Act, nor any

other provision within the Act that we are aware of, imposes a

restraint on the Cochrans’ (or any other milk producer’s)

freedom to communicate any message they desire to any

audience whatsoever.’

* We note, for the sake of clarity and completeness, that in making this

determination we have considered the entire regulatory scheme applicable

to milk producers as opposed to limiting our analysis to the Stabilization

Act alone. See Gallo Cattle Company v. California Milk Advisory Board,

185 F.3d 969 (9th Cir. 1999) (where the court considered the entire

regulatory scheme affecting milk producers rather than limiting its review

to the single milk marketing order being challenged in that case).

° We believe that there can be no dispute that milk producers are

regulated to a far greater extent than were the mushroom growers in

United FoodsUnited Foods.

’ The fact that the assessments “may indirectly lead to a reduction in a

[dairy producer’s] individual advertising budget does not itself amount to

a restriction on speech.” Wileman, 521 U.S. at 470.

43a

b. Whether Section 4504(g) of the Stabilization Act

compels any person to engage in any actual or symbolic

speech. |

Section 4504(g) does not compel the Cochrans to engage in

any actual or symbolic speech. The mandatory assessments

charged to the Cochrans and other milk producers pursuant to

the Act, although used to subsidize the generic advertising of

milk, are not considered to be “compelled speech.”® See

Gallo, 185 F.3d at 976 (citing Wileman, 521 U.S. 470-72, 138

L. Ed. 2d 585, 117 S. Ct. 2130). Moreover, the generic

advertisements funded by the assessments are attributed to the

National Dairy Promotion Board rather than to the Cochrans

or any other individual dairy producers. See 7 U.S.C.

§ 4504(c).

c. Whether Section 4504(g) of the Stabilization Act

compels dairy producers to endorse or finance any

political or ideological views.

Pursuant to the provisions of the Stabilization Act, the

Cochrans are obligated to finance advertisements which

contain messages to which they object. Specifically, the

Cochrans assert that they disagree with the promotion of milk

generically as “speech that denies there is any difference in

milk.” Cochran Decl. P. 13.

* This is because “the use of assessments to pay for advertising does

not require [the Cochrans] to repeat an objectionable message out of their

own mouths, require them to use their own property to convey and

antagonistic ideological message, force them to respond to a hostile

message when they would prefer to remain silent, or require them to be

publicly identified or associated with another’s message.” Wileman, 521

U.S. 470-471, 138 L. Ed. 2d 585, 117 S. Ct. 2130 (internal citations and

quotations omitted).

* At oral argument, the Cochrans asserted additional, albeit somewhat

imprecise, objections to the content of the advertisements: that the

Cochrans prefer more traditional farming methods than those employed

44a

For the sake of deciding upon the pending motions, we

assume without holding that the Cochrans’ objections are

ideological in their nature.

“Assessments to fund a lawful collective program may

sometimes be used to pay for [ideological] speech over the

objection of some members of the group,” Wileman, 521 U.S.

at 472-3, but only if the advertising funded by those

assessments is “germane to the purposes for which compelled

association [is] justified.” See id. at 473; see also Abood v.

Detroit Bd. of Education, 431 U.S. 230, 235-36, 52 L. Ed. 2d

261, 97 S. Ct. 1782 (1977); Gallo, 185 F.3d at 976.

The Stabilization Act was conceived of as a means of

creating “a coordinated program of promotion designed to

strengthen the dairy industry’s position in the marketplace

and to maintain and expand domestic and foreign markets and

uses for fluid milk and dairy products.” 7 U.S.C. § 4501(b).

“Generic advertising is intended to stimulate consumer

demand for an agricultural product in a regulated market.”

Wileman, 521 U.S. at 476. There can be no doubt if the

relevant advertising is effective in that it increases the

demand for milk, it will have furthered the articulated

objectives of the Act. Therefore, we hold that the creation of

a generic advertising campaign for milk is germane to the

declared purposes of the Stabilization Act.'°

by the majority of milk producers and that advertisements may be deemed

to promote sexually explicit messages.

' It is worth noting that Plaintiffs do not assert that the advertising at

issue is in any way false or deceptive. In this regard, Plaintiffs’ imprecise

“criticisms of generic advertising provide no basis for concluding that

factually accurate advertising constitutes an abridgment of anybody’s

right to speak freely.” Wileman, 521 U.S. 474, 138 L. Ed. 2d 585, 117 S.

Ct. 2130.

45a

CONCLUSION:

It became clear to the Court at oral argument that despite

Plaintiffs’ efforts to frame their argument within the ambit of

the United Foods and Wileman continuum of cases, in reality

Plaintiffs are urging this Court to embrace and apply Justice

Souter’s dissenting opinion in Wileman to the case at bar."

To follow Justice Souter’s position would necessarily entail

applying a standard of review contrary to the holding of

Wileman. As a district court, we are bound to apply the law

of the land in a manner consistent with Supreme Court

jurisprudence. We will not, therefore, disregard controlling

precedent. '

Accordingly, we find that Section 4504(g) of the Sta-

bilization Act is a species of economic regulation that does

not infringe upon the First Amendment rights of the

Cochrans. We will deny Plaintiffs’ Motion for Summary

Judgment and grant both the Governmental Defendants’ and

the Intervenors’ motions for summary judgment.

'' Justice Souter would “adhere to the principle laid down in our com-

pelled-speech cases: laws requiring an individual to engage in or pay for

expressive activities are reviewed under the same standard that applies to

laws prohibiting one from engaging in «* paying for such activities. Under

the test for commercial speech, the law may be held constitutional only if

(1) the interest being pursued by the government is substantial, and (2) the

regulation direction advances that interest and (3) is narrowly tailored to

serve it.” Wileman, 521 U.S. 491, 138 L. Ed. 2d 585, 117 S. Ct. 2130

(SOUTER, J., dissenting).

'? Cognizant that we may be stating the cbvious, our holding should be

considered apart from any perceived appraisal on our part as to the bene-

fits ov harms arising out of the imposition of a generic advertising pro-

gram funded by assessments charged to milk producers pursuant to the

Stabilization Act. Reasonable people can and do differ as to the virtues of

such a scheme.

46a

NOW THEREFORE, IT IS ORDERED THAT:

1. Plaintiffs’ Motion for Summary Judgment (doc. 2) is

denied.

2. The Governmental Defendants’ Motion to Dismiss or, in

the Alternative, Motion for Summary Judgment (doc. 9) is

granted.

3. The Intervenors’ Motion for Summary Judgment (doc.

45) is granted.

4. Plaintiffs’ Motion for Leave to Supplement the Record

(doc. 62) is granted.

5. The Clerk is directed to close the file on the case.

John E. Jones Ill

United States District Judge

47a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 03-2522

JOSEPH S. COCHRAN; BRENDA S. COCHRAN,

Appellants,

ANN VENEMAN, Secretary, U.S. Department of Agriculture;

NATIONAL DAIRY PROMOTION BOARD, FRED LOVELL; LEE

GREENWALT; JACKIE ROOT; EARNEST NORMAN; STEPHEN

MASHALL; CECIL MOYER; JAMES VANBLARCOM

Intervenor/Defendants in D.C.

On Appeal from the United States District Court for the

Western District of Pennsylvania (D.C. No. 02-cv-00529)

District Jude: The Honorable John E. Jones

Submitted under Third Circuit LAR 34.1(a)

January 12, 2004

SUR PETITION FOR REHEARING

AND HEARING EN BANC

Before: SCIRICA, Chief Judge, SLOVITER, NYGAARD,

ALITO, ROTH, McKEE, RENDELL, BARRY, AMBRO,

FUENTES, SMITH CHERTOFF, FISHER and ALDISERT’,

Circuit Judges

* Judge Aldisert’s vote was limited to panel rehearing only.

48a

The Petition for Rehearing filed by Appellant filed by

Appellees and the Petition for Rehearing on behalf of the

Intervenors having been submitted to the judges who

participate din the decision of this Court, and to all the other

available circuit judges in active service, and no judge who

concurred in the decision having asked for rehearing, and a

majority of the circuit judges of the circuit in regular avtive

service not having voted for rehearing by the court en banc,

the petition for rehearing is DENIED.

BY THE COURT

/s/ Ruggero J. Aldisert

RUGGERO J. ALDISERT

Circuit Judge

DATED: May 3, 2004

49a

APPENDIX D

7 USCS § 4501 (2004)

§ 4501. Congressional findings and declaration of policy

(a) Congress finds that—

(1) dairy products are basic foods that are a valuable part

of the human diet;

(2) the production of dairy products plays a significant

role in the Nation’s economy, the milk from which dairy

products are manufactured is produced by thousands of

milk producers, and dairy products are consumed by

millions of people throughout the United States;

(3) dairy products must be readily available and

marketed efficiently to ensure that the people of the

United States receive adequate nourishmeift;

(4) the maintenance and expansion of existing markets

for dairy products are vital to the welfare of milk

producers and those concerned with marketing, using,

and producing dairy products, as well as to the general

economy of the Nation; and

(5) dairy products move in interstate and foreign

commerce, and dairy products that do not move in such

channels of commerce directly burden or affect interstate

commerce of dairy products.

(b) It, therefore, is declared to be the policy of Congress

that it is in the public interest to authorize the establishment,

through the exercise of the powers provided herein, of an

orderly procedure for financing (through assessments on all

milk produced in the United States for commercial use and on

imported dairy products) and carrying out a coordinated

program of promotion designed to strengthen the dairy

industry’s position in the marketplace and to maintain and

50a

expand domestic and foreign markets and uses for fluid milk

and dairy products. Nothing in this subtitle [7 USCS §§ 4501

et seg.) may be construed to provide for the control of

production or otherwise limit the right of individual miik

producers to produce milk or the right of any person to import

dairy products.

§ 4502. Definitions

As used in this subtitle [7 USCS §§ 4501 et seqg.|—

(a) the term “Board” means the National Dairy Promotion

and Research Board established under section 113 of this

subtitle [7 USCS § 4504];

(b) the term “Department” means the Department of

Agriculture;

(d) the term “milk” means any class of cow’s milk;

(e) the term “dairy products” means products manufactured

for human consumption which are derived from the

processing of milk, and includes fluid milk products;

(f) the term “fluid milk products” means those milk pro-

ducts normally consumed in liquid form as a beverage;

(g) the term “person” means any individual, group of

individuals, partnership, corporation, association, coopera-

tive, or any other entity;

(h) the term “producer” means any person engaged in the

production of milk for commercial use;

(i) the term “promotion” means actions such as paid adver-

tising, sales promotion, and publicity to advance the image

and sales of and demand for dairy products;

(j)the term “research” means studies testing the effective-

ness of market development and promotion efforts, studies

S5la

relating to the nutritional value of milk and dairy products,

and other related efforts to expand demand for milk and dairy

products;

(k) the term “nutrition education” means those activities

intended to broaden the understanding of sound nutritional

principles including the role of milk and dairy products in a

balanced diet;

(1) the term “United States” as used in sections 110 through

117 [7 USCS §§ 4501-4508] means the forty-eight contigu-

ous States in the continental United States;

(m) the term “imported dairy product” means any dairy

product that is imported into the United States (as defined in

subsection (1)), including dairy products imported into the

United States in the form of—

(1) milk, cream, and fresh and dried dairy products;

(2) butter and butterfat mixtures;

(3) cheese; and

(4) casein and mixtures;

(n) the term “importer” means a person that imports an

imported dairy product into the United States; and

(o) the term “Customs” means the United States Customs

Service.

§ 4503. Issuance of orders

(a) Notice and opportunity for public comment. During the

period beginning with the date of enactment of this subtitle

[enacted Nov. 29, 1983] and ending thirty days after receipt

of a proposal for an initial dairy products promotion and

research order, the Secretary shall publish such proposed

order and give due notice and opportunity for public

comment upon the proposed order. The proposal for an order

may be submitted by an organization certified under section

52a

114 of this subtitle [7 USCS § 4505] or by any interested

person affected by the provisions of this subtitle [7 USCS

§§ 4501 ef seq.].

(b) Effective date of orders. After notice and opportunity

for public comment are given, as provided for in subsection

(a) of this section, the Secretary shall issue a dairy products

promotion and research order. Such order shall become

effective not later than ninety days following publication of

the proposal.

to time, amend a dairy products promotion and research

order.

(d) Order implementation and _ international trade

obligations. The Secretary, in consultation with the United

States Trade Representative, shall ensure that the order is

implemented in a manner consistent with the international

trade obligations of the Federal Government.

§ 4504. Required terms in orders

Any order issued under this subtitle [7 USCS §§ 4501

et seq.| shall contain terms and conditions as follows:

(a) The order shall provide for the establishment and

administration of appropriate plans or projects for adver-

tisement and promotion of the sale and consumption of dairy

products, for research projects related thereto, for nutrition

education projects, and for the disbursement of necessary

funds for such purposes. Any such plan or project shall be

directed toward the sale and marketing or use of dairy

products to the end that the marketing and use of dairy

products may be encouraged, expanded, improved, or made

more acceptable. No such advertising or sales promotion

program shall make use of unfair or deceptive acts or

practices with respect to the quality, value, or use of any

competing product. :

socal abeeicuiiiaiaaasaasmeaesiaaiiiiiaeaeeneaiaaiatiiea emiaiani:

53a

(b) National Dairy Promotion and Research Board.

(1) The order shall provide for the establishment and

appointment by the Secretary of a National Dairy

Promotion and Research Board that shall consist of not

less than thirty-six members.

(2) Except as provided in paragraph (6), the members

of the Board shall be milk producers appointed by the

Secretary from nominations submitted by eligible

organizations certified under section 114 of this subtitle

[7 USCS § 4505], or, if the Secretary determines that

a substantial number of milk producers are not members

of, or their interests are not represented by, any such

eligible organization, then from nominations made

by such milk producers in the manner authorized by

the Secretary.

(3) In making such appointments, the Secretary shall

take into account, to the extent practicable, the

geographical distribution of milk production volume

throughout the United States.

(4) In determining geographic representation, whole

States shall be considered as a unit.

(5) A region may be represented by more than one

director and a region may be made up of more than

one State.

(6) Importers.

(A) Initial representation. In making initial appointments to

the Board of importer representatives, the Secretary shall

appoint 2 members who represent importers of dairy products

and are subject to assessments under the order.

(B) Subsequent representation. At least once every 3 years

after the initial appointment of importer representatives under

subparagraph (A), the Secretary shall review the average

volume of domestic production of dairy products compared to

54a

the average volume of imports of dairy products into the

United States during the previous 3 years and, on the basis of

that review, shall reapportion importer representation on the

Board to reflect the proportional share of the United States

market by domestic production and imported dairy products.

appointed under this paragraph—

(i) shall be in addition to the total number of members

appointed under paragraph (2); and .

(ii) shall be appointed from nominations submitted by

importers under such procedures as the Secretary

determines to be appropriate.

(7) The term of appointment to the Board shall be

for three years with no member serving more than

two consecutive terms, except that initial appointments

shall be proportionately for one-year, two-year, and

three-year terms.

(8) The Board shall appoint from its members an

executive committee whose membership shall equally

reflect each of the different regions in the United States

in which milk is produced as well as importers of

dairy products.

(9) The executive committee shall have such duties and

powers as are conferred upon it by the Board.

(10) Board members shall serve without compensation,

but shall be reimbursed for their reasonable expenses

incurred in performing their duties as members of the

Board including a per diem allowance as recommended

by the Board and approved by the Secretary.

Board that shall include only the powers enumerated in this

section. These shall include, in addition to the powers set

forth elsewhere in this section, the powers to (1) receive and

55a

evaluate, or on its own initiative develop, and budget for

plans or projects to promote the use of fluid milk and dairy

products as well as projects for research and nutrition

education and to make recommendations to the Secretary

regarding such proposals, (2) administer the order in

accordance with its terms and provisions, (3) make rules and

regulations to effectuate the terms and provisions of the order,

(4) receive, investigate, and report to the Secretary complaints

of violations of the order, and (5) recommend to the Secretary

amendments to the order. The Board shall solicit, among

others, research proposals that would increase the use of fluid

milk and dairy products by the military and by persons in

developing nations, and that would demonsirate the feasibility

of converting surplus nonfat dry milk to casein for domestic

and export use.

(d) The order shall provide that the Board shall develop

and submit to the Secretary for approval any promotion,

research, or nutrition education plan or project and that any

such plan or project must be approved by the Secretary before

becoming effective.

(e) Budgets.

(1) Preparation and submission. The order shall require

the Board to submit to the Secretary for approval

budgets on a fiscal period basis of its anticipated

expenses and disbursements in the administration of the

order, including projected costs of dairy products

promotion and research projects.

(2) Foreign market efforts. The order shall authorize

the Board to expend in the maintenance and expansion

of foreign markets an amount not to exceed the amount

collected from United States producers for a fiscal year.

Of those funds, for each of the 2002 through 2007 fiscal

years, the Board’s budget may provide for the

expenditure of revenues available to the Board to

56a

develop international markets for, and to promote within

such markets, the consumption of dairy products pro-

duced or manufactured in the United States.

(f) The order shall provide that the Board, with the

approval of the Secretary, may enter into agreements fo~ the

development and conduct of the activities authorized u.der

the order as specified in subsection (a) and for the payment

of the cost thereof with funds collected through assess

ments under the order. Any such agreement shall provide that

(1) the contracting party shall develop and submit to the

Board a plan or project together with a budget or budgets that

shall show estimated costs to be incurred for such plan or

project, (2) the plan or project shall become effective upon

the approval of the Secretary, and (3) the contracting party

shall keep accurate records of all of its transactions, account

for funds received and expended, and make periodic reports

to the Board of activities conducted, and such other reports as

the Secretary or the Board may require.

(g) Assessments.

(1) The order shall provide that each person making

payment to a producer for milk produced in the United

States and purchased from the producer shall, in the

manner as prescribed by the order, collect an assessment

based upon the number of hundredweights of ntiik for

commercial use handled for the account of the producer

and remit the assessment to the Board.

(2) The assessment shall be used for payment of the

expenses in administering the order, with provision for a

reasonable reserve, and shall include those admini-

strative costs incurred by the Department after an ord-

- er has been promulgated under this subtitle [7 USCS

§§ 4501 et seq.}.

(3) The rate of assessment for milk produced in the

United States and imported dairy products prescribed by

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the order shall be 15 cents per hundredweight of milk for

commercial use or the equivalent thereof, as provided by

the Secretary.

(4) A milk producer or the producer’s cooperative who

can establish that the producer is participating in active,

ongoing qualified State or regional dairy product

promotion or nutrition education programs intended

to increase consumption of milk and dairy products

generally shall receive credit in determining the assess-

ment due from such producer for contributions to such

programs of up to 10 cents per hundredweight of milk

marketed or, for the period ending six months after the

date of enactment of this Act [enacted Nov. 29, 1983],

up to the aggregate rate in effect on the date of

enactment of this Act [enacted Nov. 29, 1983] of such

contributions to such programs (but not to exceed 15

cents per hundredweight of milk marketed) if such

aggregate rate exceeds 10 cents per hundredweight of

milk marketed.

(5) Any person marketing milk of that person’s own

production directly to consumers shall remit the

assessment directly to the Board in the manner

_______- prescribed by the order.

(6) Importers.

(A) In general. The order shall provide that each importer

of imported dairy products shall pay an assessment to the

Board in the manner prescribed by the order.

(B) Time for payment. The assessment on imported dairy

products shall be paid by the importer to Customs at the time

the entry documents are filed with Customs. Customs shall

remit the assessments to the Board. For purposes of this

subparagraph, the term “importer” includes persons who hold

title to foreign-produced dairy products immediately upon

release by Customs, as well as persons who act on behalf of

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others, as agents, brokers, or consignees, to secure the release

of dairy products from Customs.

Assessments collected on imported dairy products shall not

be used for foreign market promotion.

(h) The order shall require the Board to (1) maintain such

books and records (which shall be available to the Secretary

for inspection and audit) as the Secretary may prescribe, (2)

prepare and submit to the Secretary, from time to time, such

reports as the Secretary may prescribe, and (3) account for the

receipt and disbursement of all funds entrusted to it.

(i) The order shall provide that the Board, with the

approval of the Secretary, may invest, pending disbursement

under a plan or project, funds collected through assessments

authorized under this subtitle [7 USCS §§ 4501 ef seq.] only

in obligations of the United States or any agency thereof, in

general obligations of any State or any political subdivision

thereof, in any interest-bearing account or certificate of

deposit of a bank that is a member of the Federal Reserve

System, or in obligations fully guaranteed as to principal and

interest by the United States.

(j) The order shall prohibit any funds collected by the

Board under the order from being used in any manner for the

purpose of influencing governmental policy or action except

as provided by subsection (c)(5).

(k) The order shall require that each importer of imported

dairy products, each person receiving milk from farmers for

commercial use, and any person marketing milk of that

person’s own production directly to consumers, maintain and

make available for inspection such books and records as may

be required by the order and file reports at the time, in the

manner, and having the content prescribed by the order. Such

information shall be made available to the Secretary as is

appropriate to the administration or enforcement of this

nt S|. a,

59a

subtitle [7 USCS §§ 4501 et seq.], or any order or regulation

issued under this subtitle [7 USCS §§ 4501 ef seg.]. All

information so obtained shall be kept confidential by all

officers and employees of the Department, and only such

information so obtained as the Secretary deems relevant may

be disclosed by them and then only in a suit or administrative

hearing brought at the request of the Secretary, or to which

the Secretary or any officer of the United States is a party,

and involving the order with reference to which the

information to be disclosed was obtained. Nothing in this

subsection may be deemed to prohibit (1) the issuance of

general statements, based upon the reports, of the number of

persons subject to an order or statistical data collected

therefrom, which statements do not identify the information

furnished by any person, or (2) the publication, by direction

of the Secretary, of the name of any person violating any

order, together with a statement of the particular provisions of

the order violated by such person. No information obtained

under the authority of this subtitle [7 USCS §§ 4501 ef seq.]

may be made available to any agency or officer of the Federal

Government for any purpose other than the implementation of

this subtitle [7 USCS §§ 4501 et seg.] and any investigatory

or enforcement action necessary for the implementation of

this subtitle [7 USCS §§ 4501 ef seg.]. Any person violating

the provisions of this subsection shall, upon conviction, be

subject to a fine of not more than $ 1,000, or to imprisonment

for not more than one year, or both, and, if an officer or

employee of the Board or the Department, shall be removed

from office.

(1) The order shall provide terms and conditions, not

inconsistent with the provisions of this subtitle [7 USCS

§§ 4501 ef seq.], as necessary to effectuate the provisions of

the order.

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§ 4505. Certification of organizations

(a) The eligibility of any organization to represent milk

producers, and to participate in the making of nominations

under section 113 of this subtitle [7 USCS § 4504] shall be

certified by the Secretary. The Secretary shall certify any

organization that the Secretary determines meets the eligi-

bility criteria established by the Secretary under this section

and the Secretary’s determination as to eligibility shall

be final.

(b) Certification shall be based, in addition to other

available information, on a factual report submitted by the

organization, which shall contain information deemed

relevant and specified by the Secretary, including, but not

limited to, the following:

(1) geographic territory covered by the organization’s

active membership;

(2) nature and size of the organization’s active

membership including the proportion of the total number

of active milk producers represented by the organization;

(3) evidence of stability and permanency of the

organization;

(4) sources from which the organization’s operating

funds are derived;

(5) functions of the organization; and

(6) the organization’s ability and willingness to fur-

ther the aims and objectives of this subtitle [7 USCS

§§ 4501 ef seq.}.

The primary considerations in determining the eligibility of

an organization shall be whether its membership consists

primarily of milk producers who produce a substantial

volume of milk and whether the primary or overriding

interest of the organization is in the production or processing

6la

of fuid milk and dairy products and promotion of the

nutritional attributes of fluid milk and dairy products.

§ 4506. Requirement of referendum

(a) Within the sixty-day period immediately preceding

September 30, 1985, the Secretary shall conduct a referendum

among producers who, during a representative period (as

determined by the Secretary), have been engaged in the

production of milk for commercial use for the purpose of

ascertaining whether the order then in effect shall be

continued. Such order shall be continued only if the Secretary

determines that it has been approved by not less than a

majority of the producers voting in the referendum, who

during a representative period (as determined by the

Secretary) have been engaged in the production of milk for

commercial use. If continuation of the order is not approved

by a majority of the producers voting in the referendum, the

Secretary shall terminate collection of assessments under the

order within six months after the Secretary determines that

such action is favored by a majority of the producers voting

in the referendum and shall terminate the order in an orderly

manner as soon as practicable after such determination.

(b) The Secretary shall be reimbursed from assessments

collected by the Board for any expenses incurred by the

Department in connection with the conduct of any

referendum under this section and section 116 [7 USCS

§ 4507], except for the salaries of Government employees.

§ 4507. Suspension and termination of orders

(a) After September 30, 1985, the Secretary shall,

whenever the Secretary finds that any order issued under this

subtitle [7 USCS §§ 4501 ef seq.] or any provision thereof

obstructs or does not tend to effectuate the declared policy of

this subtitle [7 USCS §§ 4501 ef seq.], terminate or suspend

the operation of such order or such provisions thereof.

62a

(b) After September 30, 1985, the Secretary may conduct a

referendum at. any time, and shall hold a referendum on

request of a representative group comprising 10 per centum

or more of the number of producers and importers subject to

the order, to determine whether the producers and importers

favor the termination or suspension of the order. The

Secretary shal] suspend or terminate collection of assessments

under the order within six months after the Secretary

determines that suspension or termination of the order is

favored by a majority of the producers voting in the

referendum who, during a representative period (as deter-

mined by the Secretary), have been engaged in the production

of milk for commercial use and importers voting in the

referendum (who have been engaged in the importation of

dairy products during the same representative period, as

determined by the Secretary) and shall terminate the order in

an orderly manner as soon as practicable after such

determination.

provision thereof, shall not be considered an order within the

meaning of this subtitle [7 USCS §§ 4501 ef seq.].

§ 4508. Cooperative association representation

Whenever, under the provisions of this subtitle [7 USCS

§§ 4501 ef seg.], the Secretary is required to determine the

approval or disapproval of producers, the Secretary shall

consider the approval or disapproval by any cooperative

association of producers, engaged in a bona fide manner in

marketing milk or the products thereof, as the approval or

disapproval of the producers who are members of or under

contract with such cooperative association of producers. If a

cooperative association of producers elects to vote on behalf

of its members, such cooperative association shall provide

each producer, on whose behalf the cooperative association is

expressing approval or disapproval, a description of the ques-

tion presented in the referendum together with a statement of

63a

the manner in which the cooperative association intends to

cast its vote on behalf of the membership. Such information

shall inform the producer of procedures to follow to cast an

individual ballot should the producer so choose within the

period of time established by the Secretary for casting ballots.

Such notification shall be made at least thirty days prior to the

referendum and shall include an official ballot. The ballots

shall be tabulated by the Secretary and the vote of the

cooperative association shall be adjusted to reflect such

individual votes.

§ 4509. Petition and review

(a) Any person subject to any order issued under this

subtitle [7 USCS §§ 4501 ef seg.] may file with the Secretary

a petition stating that any such order or any provision of such

order or any obligation imposed in connection therewith is

not in accordance with law and requesting a modification

thereof or an exemption therefrom. The petitioner shall there-

upon be given an opportunity for a hearing on the petition, in

accordance with regulations issued by the Secretary. After

such hearing, the Secretary shall make a ruling on the

petition, which shall be final if in accordance with law.

(b) The district courts of the United States in any district in

which such person is an inhabitant or carries on business are

hereby vested with jurisdiction to review such ruling, if a

complaint for that purpose is filed within twenty days from

the date of the entry of such ruling. Service of process in such

proceedings may be had on the Secretary by delivering a copy

of the complaint to the Secretary. If the court determines that

such ruling is not in accordance with law, it shall remand

such proceedings to the Secretary with directions either (1) to

make such ruling as the court shall determine to be in

accordance with law, or (2) to take such further proceedings

as, in its opinion, the law requires.

64a

§ 4510. Enforcement om

(a) Restraining order; civil action; minor violation. The

district courts of the United States are vested with jurisdiction

specifically to enforce, and to prevent and restrain any person

from violating, any order or regulation made or issued under

this subtitle [7 USCS §§ 4501 ef seqg.]. Any civil action

authorized to be brought under this subsection shall be

referred to the Attorney General for appropriate action,

except that the Secretary is not required to refer to the

Attorney General minor violations of this subtitle [7 USCS

§§ 4501 ef seg.] whenever the Secretary believes that the

administration and enforcement of this subtitle [7 USCS

§§ 4501 ef seg.] would be adequately served by suitable

written notice or warning to any person committing such

violation.

(b) Civil penalties. Any person who willfully violates any

provision of any order issued by the Secretary under this

subtitle [7 USCS §§ 4501 ef seq.] shall be assessed a civil

penalty by the Secretary of not more than $ 1,000 for each

such violation and, in the case of a willful failure to pay,

collect, or remit the assessment as required by the order, in

addition to the amount due, a penalty equal to the amount of

the assessment on the quantity of milk as to which the failure

applies. The amount of any such penalty shall accrue to the

United States and may be recovered in a civil suit brought by

the United States.

in subsections (a) and (b) of this section shall be in addition

to, and not exclusive of, other remedies that may be available.

§ 4511. Investigations; power to subpoena and take oaths

and affirmations; aid of courts

The Secretary may make such investigations as the

Secretary deems necessary for the effective administration of

this subtitle [7 USCS §§ 4501 ef seg.] or to determine

65a

whether any person subject to the provisions of this subtitle [7

USCS §§ 4501 ef seg.] has engaged or is about to engage in

any act that constitutes or will constitute a violation of any

provision of this subtitle [7 USCS §§ 4501 ef seq.] or of any

order, or rule or regulation issued under this subtitle [7 USCS

§§ 4501 ef seq.|. For the purpose of such investigation, the

Secretary may administer oaths and affirmations, subpoena

witnesses, compel their attendance, take evidence, and require

the production of any records that are relevant to the inquiry.

Such attendance of witnesses and the production of any such

records may be required from any place in the United States.

In case of contumacy by, or refusal to obey a subpoena to,

any person, the Secretary may invoke the aid of any court of

the United States within the jurisdiction of which such

investigation or proceeding is carried on, or where such

person resides or carries on business, in requiring the

attendance and testimony of witnesses and the production of

records. The court may issue an order requiring such person

to appear before the Secretary to produce records or to give

testimony touching the matter under investigation. Any

failure to obey such order of the court may be punished by

suc) court as a contempt thereof. Process in any such case

may be served in the judicial district in which such person is

an inhabitant or wherever such person may be found.

§ 4512. Administrative provisions

(a) Nothing in this subtitle [7 USCS §§ 4501 ef seg.] may

be construed to preempt or supersede any other program

relating to dairy product promotion organized and operated

under the laws of the United States or any State.

(b) The provisions of this subtitle [7 USCS §§ 4501 e/

seq.| applicable to orders shall be applicable to amendments

to orders.

66a

§ 4513. Authorization of appropriations

There are hereby authorized to be appropriated such funds

as are necessary to carry out the provisions of this subtitle [7

USCS §§ 4501 ef seg.]. The funds so appropriated shall not

be available for payment of the expenses or expenditures of

the Board in administering any provisions of any order issued

under the terms of this subtitle [7 USCS §§ 4501 et seq.]

§ 4514. Dairy reports

The Secretary of Agriculture shall submit to the House

Committee on Agriculture and the Senate Committee on

Agriculture, Nutrition, and Forestry the following reports:

(1) Not later than July 1, 1984, a report on the effect of

applying, nationally, standards similar to the current

California standards for fluid milk products in their final

consumer form, as they would relate to—

(A) consumer acceptance, overall consumer consumption

trends, and total per capita consumption;

(B) nutritional augmentation, particularly for young and

older Americans;

minimum standards to prevent consumer fraud and deception;

(D) multiple component pricing for producer milk;

(E) reduced Commodity Credit Corporation purchases;

(F) consistency of product quality throughout the year and

between marketing regions of the United States; and

(G) consumer prices.

(2) Not later than December 31, 1984, a report on (A)

recommendations for changes in the application of the

parity formula to milk so as to make the formula more

consistent with modern production methods and with

special attention to the cost of producing milk as a result

67a

of changes in productivity, and (B) the feasibility of

imposing a limitation on the total amount of payments

and other assistance a producer of milk may receive

during a year under section 201(d) of the Agricultural

Act of 1949 (7 U.S.C. 1446(d)) [7 USCS § 1446(d)].

(3) Not later than April 15, 1985, a report on the

effectiveness of the paid diversion program carried out

under section 201(d) of the Agricultural Act of 1949

[7 USCS § 1446(d)].

(4) Not later than July 1, 1985, and July 1 of each year

after the date of enactment of this title [enacted Nov. 29,

1983], an annual report describing activities conducted

under the dairy products promotion and research order

issued under subtitle B of title I of this Act [7 USCS

§§ 4501 ef seq.], and accounting for the receipt and

disbursement of all funds received by the National Dairy

Promotion and Research Board under such order

including an independent analysis of the effectiveness of

the program.

68a

APPENDIX E

TITLE 7—AGRICULTURE

SUBTITLE B—REGULATIONS OF THE DEPARTMENT

OF AGRICULTURE

CHAPTER X—AGRICULTURAL MARKETING

SERVICE (MARKETING AGREEMENTS AND ORDERS;

MILK), DEPARTMENT OF AGRICULTURE

PART 1150—DAIRY PROMOTION PROGRAM

SUBPART—DAIRY PROMOTION AND

RESEARCH ORDER

§ 1150.101 Act.

Act means Title I, Subtitle B, of the Dairy and Tobacco

Adjustment Act of 1983, Pub. L. 98-180, 97 Stat. 1128, as

approved November 29, 1983, and any amendments thereto.

§ 1150.102 Department.

Department means the United States Department of

Agriculture.

§ 1150.103 Secretary.

Secretary means the Secretary of Agriculture of the United

States or any other officer or employee of the Department to

whom authority has heretofore been delegated, or to whom

authority may hereafter be delegated, to act in the Secretary’s

stead.

§ 1150.104 Board.

Board means the National Dairy Promotion and Research

Board established pursuant to § 1150.131.

69a

§ 1150.105 Person.

Person means any individual, group of individuals, partner-

ship, corporation, association, cooperative or other entity.

§ 1150.106 United States.

United States means the 48 contiguous States in the

continental United States.

§ 1150.107 Fiscal period.

Fiscal period means the calendar year or such other annual

period as the Board may determine.

§ 1150.108 Eligible organization.

Eligible organization means any organization which has

been certified by the Secretary pursuant to § § 1150.270

through 1150.278 of this part.

§ 1150.109 Qualified State or regional program.

Qualified State or regional program means any State or

regional dairy product promotion, research or nutrition

education program which is certified as a qualified program

pursuant to.

§ 1150.110 Producer.

Producer means any person engaged in the production of

milk for commercial use.

§ 1150.111 Milk.

Milk means any class of cow’s milk produced in the United

States.

§ 1150.112 Dairy products.

Dairy products means products manufactured for human

consumption which are derived from the processing of milk,

and includes fluid milk products.

70a

§ 1150.113 Fluid milk products.

Fluid milk products means those milk products normally

consumed in liquid form as a beverage.

§ 1150.114 Promotion.

Promotion means actions such as paid advertising, sales

promotion, and publicity to advance the image and sales of,

and demand for, dairy products generally.

§ 1150.115 Research.

Research means studies testing the effectiveness of market

development and promotion efforts, studies relating to the

nutritional value of milk and dairy products, and other related

efforts to expand demand for dairy products.

§ 1150.116 Nutrition education.

Nutrition education means those activities intended to

broaden the understanding of sound nutritional principles,

including the role of miik. and dairy products in a balanced

diet.

§ 1150.117 Plans and projects.

Plans and projects means promotion, research and nutrition

education plans, studies or projects pursuant to § § 1150.139,

1150.140 and 1150.161.

§ 1150.118 Marketing.

Marketing means the sale or other disposition in commerce

of dairy products.

§ 1150.119 Cooperative association.

Cooperative association means any cooperative marketing

association of producers which is organized under the

provisions of the Act of Congress of February 18, 1922, as

amended, known as the “Capper-Volstead Act”.

7la

§ 1150.131 Establishment and membership.

(a) There is hereby established a National Dairy Promotion

and Research Board of thirty-six members. For purposes of

nominating producers to the Board, the United States shall be

divided into thirteen geographic regions and the number of

Board members from each region shall be as follows:

(1) Two members from region number one comprised of

the following States: Washington and Oregon.

(2) Seven members from region number two comprised

of the following State: California. ’

(3) Three members from region number three comprised

of the following States: Arizona, Colorado, Idaho, Montana,

Nevada, Utah, and Wyoming.

(4) Three members from region number four comprised

of the following States: Arkansas, Kansas, New Mexico,

Oklahoma and Texas.

(5) Two members from region number five comprised of

the following States: Minnesota, North Dakota and South

Dakota.

(6) Five members from region number six comprised of

the following State: Wisconsin.

(7) Two members from region number seven comprised

of the following States: Illinois, Iowa, Missouri, and

Nebraska.

(8) One member from region number eight comprised of

the following States: Alabama, Kentucky, Louisiana,

Mississippi and Tennessee.

(9) Three members from region number nine comprised

of the following States: Indiana, Michigan, Ohio and West

Virginia.

72a

(10) One member from region number ten comprised of

the following States: Florida, Georgia, North Carolina, South

Carolina and Virginia.

(11) Three members from region number eleven com-

prised of the following States: Delaware, Maryland, New

Jersey and Pennsylvania.

(12) Three members from region number twelve com-

prised of the following State: New York.

(13) One member from region number thirteen com-

prised of the following States: Connecticut, Maine, Mas-

sachusetts, New Hampshire, Rhode Island and Vermont.

(b) The Board shall be composed of milk producers ap-

pointed by the Secretary either from nominations submitted

pursuant to § 1150.133 or in accordance with § 11150.136. A

milk producer may be nominated only to represent the region

in which such producer’s milk is produced.

years, the Board shall review the geographic distribution of

milk production volume throughout the United States and, if

warranted, shall recommend to the Secretary a reappor-

tionment of regions and/or a modification of the number of

members from regions in order to best reflect the geographic

distribution of milk production volume in the United States.

(d) The number of members for each region which shall

serve on the Board shall be determined by dividing the total

pounds of milk produced in the United States for the calendar

year previous to the date of review by 36 which provides a

factor of pounds of milk per member, and then dividing the

total pounds of milk for each region by such factor.

(e) In determining the volume of milk produced in the

United States, the Board and the Secretary shall utilize the

information received by the Board pursuant to § 1150.17]

and data published by the Department.

73a

§ 1150.132 Term of office.

(a) The members of the Board shall serve for terms of three

years, except that ‘he members appointed to the initial Board

shall serve proportionately, for terms of one, two and three

years.

(b) Each member of the Board shall serve until October 31

of the year in which his/her term expires, except that a

retiring member may serve until a successor is appointed.

terms.

§ 1150.133 Nominations.

Nominations for members of the Board shall be made in

the following manner:

(a) Upon effectuation of this provision, the Secretary

shall solicit nominations for the initial Board from all eligible

organizations. If the Secretary determines that a substantial

number of producers are not members of, or their interests are

not represented by, such eligible organizations, the Secretary

shall also solicit nominations from such producers through

general farmer organizations or by other means.

(b) After the appointment of the initial Board, the

Secretary shall announce at least 120 days in advance when a

Board member’s term is expiring and shall solicit

nominations for that position in the manner described in

paragraph (a) of this section. Nominations for such position

should be submitted to the Secretary not less than 60 days

prior to the expiration of such term.

only for positions on the Board that represent regions in

which such eligible organization can establish that it

represents a substantial number of producers. If there is more

than one Board position for any such region, the organization

may submit nominations for each position.

74a

(d) Where there is more than one eligible organization

representing producers in a specific region, they may caucus

and jointly nominate producers for each position representing

that region on the Board for which a member is to be

appointed. If joint agreement is not reached with respect to

any such nominations, or if no caucus is held, each eligible

organization may submit to the Secretary nominations for

each appointment to be made to represent that region.

§ 1150.134 Nominee’s agreement to serve.

Any producer nominated to serve on the Board shall file

with the Secretary at the time of the nomination a written

agreement to:

(a) Serve on the Board if appointed;

(b) Disclose any relationship with any organization that

operates a qualified State or regional program or has a

contractual relationship with the Board; and

sion-making, or voting on matters where paragraph (b)

applies.

§ 1150.135 Appointment.

From the nominations made pursuant to § 1150.133, the

Secretary shall appoint the members of the Board on the basis

of representation provided for in § 1150.131(a).

§ 1150.136 Vacancies.

To fill any vacancy occasioned by the death, removal,

resignation, or disqualification of any member of the Board,

the Secretary shall appoint a successor from the most recent

list of nominations for the position or from nominations made

by the Board.

75a

§ 1150.137 Procedure.

(a) A majority of the members shall constitute a quorum at

a properly convened meeting of the Board. Any action of the

Board shall require the concurring votes of at least a majority

of those present and voting. The Board shail establish rules

concerning timely notice of meetings.

(b) The Board may take action upon the concurring votes

of a majority of its members by mail, telephone, or telegraph

when in the opinion of the chairman of the Board such action

must be taken before a meeting can be called. Action taken by

this emergency procedure is valid only if all members are

notified and provided the opportunity to vote and any

telephone vote is confirmed promptly in writing. Any action

so taken shall have the same force and effect as though such

action had been taken at a properly convened meeting of the

Board.

§ 1150.138 Compensation and reimbursement.

The members of the Board shall serve without compen-

sation but shall be reimbursed for necessary and reasonable

expenses, including a per diem allowance as recommended -

by the Board and approved by the Secretary, incurred by

them in the performance of their duties under this subpart.

§ 1150.139 Powers of the Board.

The Board shall have the following powers:

(a) ‘To receive and evaluate, or on its own initiative

develop, and budget for plans or projects to promote the use

of fluid milk and dairy products as well as projects for

research and nutrition education and to make recommen-

dations to the Secretary regarding such proposals;

(b) To administer the provisions of this subpart in ac-

cordance with its terms and provisions;

and provisions of this subpart;

76a

(d) To receive, investigate, and report to the Secretary

compiaints of violations of the provisions of this subpart;

(e) To disseminate information to producers or eligible

organizations through programs or by direct contact utilizing

the public postage system or other systems;

(f) To select committees and subcommittees of Board

members, and to adopt such rules for the conduct of its

business as it may deem advisable;

(g) To establish advisory committees of persons other

than Board members and pay the necessary and reasonable

expenses and fees of the members of such committees;

(h) To recommend to the Secretary amendments to this

subpart; and ;

(i) With the approval of the Secretary, to invest, pending

disbursement pursuant to a plan or project, funds collected

through assessments authorized under § 1150.152 in, and

only in, obligations of the United States or any agency

thereof, in general obligations of any State or any political

subdivision thereof, in any interest-bearing account or

certificate of deposit of a bank that is a member of the Federal

Reserve System, or in obligations fully guaranteed as to

principal and interest by the United States.

§ 1150.140 Duties of the Board.

The Board shall have the following duties:

(a) To meet not less than annually, and to organize and

select from among its members a chairman and such other

officers as may be necessary;

(b) To appoint from its members an executive committee

whose membership shall equally reflect each of the different

regions in the United States in which milk is produced, and to

delegate to the committee authority to administer the terms

and provisions of this subpart under the direction of the Board

and within the policies determined by the Board;

77a

necessary and define the duties and determine the com-

pensation of each;

(d) To review all programs that promote milk and dairy

products on a brand or trade name basis that have requested

certification pursuant to § 1150.153, and to recommend to the

Secretary whether such request should be granted;

(e) To develop and submit to the Secretary for approval,

promotion, research, and nutrition education plans or projects

resulting from research or studies conducted either by the

Board or others;

(f) To solicit, among other proposals, research proposals

that would increase the use of fluid milk and dairy products

by the military and by persons in developing nations, and that

would demonstrate the feasibility of converting surplus

nonfat dry milk to caseir for domestic and export use;

(g) To prepare and submit to the Secretary for approval,

budgets on a fiscal period basis of its anticipated expenses

and disbursements in the administration of this subpart,

including probable costs of promotion, research and nutrition

education plans or projects, and also including a general

description of the proposed promotion, research and nutrition

education programs contemplated therein;

(h) To maintain such books and records, which shall be

available to the Secretary for inspection and audit, and pre-

pare and submit such reports from time to time to the

Secretary as the Secretary may prescribe, and to make

appropriate accounting with respect to the receipt and dis-

bursement of all funds entrusted to it;

(i) With the approval of the Secretary, to enter into

contracts or agreements with national, regional or State dairy

promotion and research organizations or other organizations

or entities for the development and conduct of activities

ee ee ee

78a

authorized under §§ 1150.139 and 1150.161, and for the

payment of the cost thereof with funds collected through

assessments pursuant to § 1150.152. Any such contract or

agreement shall provide that:

(1) The contractors shall develop and submit to the

Board a plan or project together with a budgets or budget

which shall show the estimated cost to be incurred for such

plan or project;

(2) Any such plan or ~roject shall become effective

upon approval of the Secretary; and

(3) The contracting party shall keep accurate records

of all of its transactions and make periodic reports to the

Board of activities conducted and an accounting for funds

received and expended, and such other reports as the

Secretary or the Board may require. The Secretary or

employees of the Board may audit periodically the records of

the contracting party;

(j) To prepare and make public, at least annually, a

report of its activities carried out and an accounting for funds

received and expended;

(k) To have an audit of its financial statements con-

ducted by a certified public accountant in accordance with

generally accepted auditing standards, at least once each

fiscal period and at such other times as the Secretary may

request, and to submit a copy of each such audit report to the

Secretary;

(1) To give the Secretary the same notice of meetings of

the Board, committees of the Board and advisory committees

as is given to such Board or committee members in order that

the Secretary, or a representative of the Secretary, may attend

such meetings;

(m) To submit to the Secretary such information pur-

suant to this subpart as may be requested; and

79a

(n) To encourage the coordination of programs of pro-

motion, research and nutrition education designed to

strengthen the dairy industry’s position in the marketplace

and to maintain and expand domestic and foreign markets and

uses for fluid milk and dairy products produced in the United

States.

§ 1150.151 Expenses.

(a) The Board is authorized to incur such expenses

(including provision for a reasonable reserve) as the Secretary

finds are reasonable and likely to be incurred by the Board for

its maintenance and functioning and to enable it to exercise

its powers and perform its duties in accordance with the

provisions of this subpart. However, after the first full year of

operation of the order, administrative expenses incurred by

the Board shall not exceed 5 percent of the projected revenue

of that fiscal year. Such expenses shall be paid from

assessments collected pursuant to § 1150.152.

(b) The Board shall reimburse the Secretary, from assess-

ments collected pursuant to § 1150.152, for administrative

costs incurred by the Department after May |, 1984.

§ 1150.152 Assessments.

(a) Each person making payment to a producer for milk

produced in the United States and marketed for commercial

use shall collect an assessment on all such milk handled for

the account of the producer at the rate of 15 cents per

hundredweight of milk for commercial use or the equivalent

thereof and shall remit the assessment to the Board.

(b) Any producer marketing milk of that producer’s own

production in the form of milk or dairy products to con-

sumers, either directly or through retail or wholesale outlets,

shall remit to the Board an assessment on such milk at the

rate of 15 cents per hundredweight of milk for commercial

use or the equivalent thereof.

80a

pursuant to § 1150.152 (a) and (b), a producer who is

participating in a qualified State or regional program(s) shall

receive a credit for contributions to such program(s), but not

to exceed the following amounts:

(1) In the case of contributions for milk marketed on or

before May 31, 1984, up to the actual rate of contribution that

was in effect under such program(s) on November 29, 1983,

not to exceed 15 cents per hundredweight of milk marketed.

(2) In all other cases, the credit shall not exceed 10 cents

per hundredweight of milk marketed.

(d) In order for a producer described in § 1150.152(a) to .

receive the credit authorized in § 1150.152(c), either the

producer or a cooperative association on behalf of the

producer must establish to the person responsible for

remitting the assessment to the Board that the producer is

contributing to a qualified State or regional program.

Producers who contribute to a qualified program directly

(other than through a payroll deduction) must establish with

the person responsible for remitting the assessment to the

Board, with validation by the qualified program, that they are

making such contributions.

(e) In order for a producer described in § 1150.152(b) to

receive the credit authorized in § 1150.152(c), the producer

and the applicable qualified State or regional program must

establish to the Board that the producer is contributing to a

qualified State or regional program.

(f) The collection of assessments pursuant to § 1150.152(a)

and (b) shall begin with respect to milk marketed on and after

the effective date of this section and shall continue until

terminated by the Secretary. If the Board is not constituted by

the date the first assessments are to be collected, the Secretary

shall have the authority to receive the assessments on behalf

of the Board. The Secretary shall remit such assessments to

the Board when it is constituted.

8la

(g) Each person responsible for the remittance of the

assessment pursuant to § 1150.152(a) and (b) shall remit the

assessment to the Board not later than the last day of the

month following the month in which the milk was marketed.

(h) Money remitted to the Board shall be in the form of a

negotiable instrument made payable to “National Dairy

Promotion and Research Board.” Remittances and reports

specified in § 1150.171 shall be mailed to the location

designated by the Secretary or the Board.

§ 1150.153 Qualified State or regional dairy product

promotion, research or nutrition education programs.

(a) Any organization which conducts a State or regional

dairy product promotion, research or nutrition education

program may apply to the Secretary for certification of

qualification so that producers may receive credit pursuant to

§ 1150.152(c) for contributions to such program.

(b) In order to be certified by the Secretary as a qualified

program, the program must:

(1) Conduct activities as defined in §§ 1150.114,

1150.115, and 1150.116 that are intended to increase con-

sumption of milk and dairy products generally;

(2) Except for programs operated under the laws of the

United States or any State, have been active and ongoing

before enactment of the Act;

(3) Be financed primarily by producers, either indi-

vidually or through cooperative associations;

(4) Not use a private brand or trade name in its ad-

vertising and promotion of dairy products unless the Board

recommends and the Secretary concurs that such preclusion

should not apply;

(5) Certify to the Secretary that any requests from pro-

ducers for refunds under the program will be honored by

82a

forwarding to either the Board or a qualified State or regional

program designated by the producer that portion of such

refunds equal to the amount of credit that otherwise would be

applicable to that program pursuant to § 1150.152(c); and

(6) Not use program funds for the purpose of influencing

governmental policy or action.

any State or regional dairy product promotion, research or

nutrition education program which does. not satisfy the

requirements specified in paragraph (b) of this section shall

be denied. The certification of any qualified program which

fails to satisfy the requirements specified in paragraph (b) of

this section after certification shall be subject to suspension or

termination.

(1) Prior to the denial of an application for certification

of qualification, or the suspension or termination of an

existing certification, the Director of the Dairy Division shall

afford the applicant or the holder of an existing certification

an opportunity to achieve compliance with the requirements

for certification within a reasonable time, as determined by

the Director.

(2) Any State or regional dairy product promotion,

research or nutrition educa ‘on program whose application for

certification of qualification is to be denied, or whose

certification of qualification is to be suspended or terminated

shall be given written notice of such pending action and shall

be afforded an opportunity to petition the Secretary for a

review of the action. The petition shall be in writing and shall

state the facts relevant to the matter for which the review is

sought, and whether petitioner desires an informal hearing. If

an informal hearing is not requested, the Director of the Dairy

Division shall issue a final decision setting forth the action to

be taken and the basis for such action. If petitioner requests a

hearing, the Director of the Dairy Division, or a person

83a

designated by the Director, shall hold an informal hearing in

the following manner:

(i) Notice of a hearing shall be given in writing and

shall be mailed to the last known address of the petitioner or

of the State or regional program, or to an officer thereof, at

least 20 days before the date set for the hearing. Such notice

shall contain the time and place of the hearing and may

contain a statement of the reason for calling the hearing and

the nature of the questions upon which evidence is desired or

upon which argument may be presented. The hearing place

shall be as convenient to the State or regional program as can

reasonably be arranged.

(ii) Hearings are not to be public and are to be

attended only by representatives of the petitioner or the State

or regional program and of the U.S. Government, and such

other parties as either the State or regional program or the

U.S. Government desires to have appear for purposes of

submitting information or as counsel.

(iii) The Director of the Dairy Division, or a person

designated by the Director, shall be the presiding officer at

the hearing. The hearing shall be conducted in such manner

as will be most conducive to the proper disposition of the

matter. Written statements or briefs may be filed by the peti-

tioner or the State or regional program, or other participating

parties, within the time specified by the presiding officer.

(iv) The presiding officer shall prepare preliminary

findings setting forth a recommendation as to what action

should be taken and the basis for such action. A copy of such

findings shall be served upon the petitioner or the State or

regional program by mail or in person. Written exceptions to

the findings may be filed within 10 days after service thereof.

(v) After due consideration of all the facts and the

exceptions, if any, the Director of the Dairy Division shall

issue a final decision setting forth the action to be taken and

the basis for such action.

aetna

84a

§ 1150.154 Influencing governmental action.

No funds collected by the Board under this subpart shall in

any manner be used for the purpose of influencing

governmental policy or action, except to recommend to the

Secretary amendments to this subpart.

§ 1150.155 Adjustment of accounts.

Whenever the Board or the Department determines through

an audit of a person’s reports, records, books or accounts or

through some other means that additional money is due the

Board or that money is due such person from the Board, such

person shall be notified of the amount due. The person shall

then remit any amount due the Board by the next date for

- remitting assessments as provided in § 1150.152. Overpay-

ments shall be credited to the account of the person remitting

the overpayment and shall be applied against amounts due in

succeeding months.

§ 1150.156 Charges and. penalties.

(a) Late-payment charge. Any unpaid assessments to the

Board pursuant to § 1150.152 shall be increased 1.5 percent

each month beginning with the day following the date such

assessments were due. Any remaining amount due, which

shall include any unpaid charges previously made pursuant to

this section, shall be increased at the same rate on the

corresponding day of each month thereafter until paid. For the

purpose of this section, any assessment that was determined

at a date later than prescribed by this subpart because of a

person’s failure to submit a report to the Board when due

shall be considered to have been payable by the date it would

have been due if the report had been filed when due. The

timeliness of a payment to the Board shall be based on the

applicable postmark date or the date actually received by the

Board, whichever is earlier.

85a

(b) Penalties. Any person who willfully violates any pro-

vision of this subpart shall be assessed a civil penalty by the

Secretary of not more than $1,000 for each such violation

and, in the case of a willful failure to pay, collect, or remit the

assessment as required by this subpart, in addition to the

amount due, a penalty equal to the amount of the assessment

on the quantity of milk as to which the failure applies. The

amount of any such penalty shall accrue to the United States

and may be recovered in a civil suit brought by the United

States. The remedies provided in this section shall be in

addition to, and not exclusive of, other remedies that may be

available by law or in equity.

§ 1150.161 Promotion, research and nutrition education.

(a) The Board shall receive and evaluate, or on its own

initiative develop, and submit to the Secretary for approval

any plans or projects authorized in §§ 1150.139, 1150.140

and this section. Such plans or projects shall provide for:

(1) The establishment, issuance, effectuation, and ad-

ministration of appropriate plans or projects for promotion,

research and nutrition education with respect to milk and

dairy products; and

(2) The establishment and conduct of research and

studies with respect to the sale, distribution, marketing and

utilization of milk and dairy products and the creation of new

products thereof, to the end that marketing and utilization of

milk and dairy products may be encouraged, expanded,

improved or made more acceptable. Included shall be

research and studies of proposals intended to increase the use

of fluid milk and dairy products by the military and by

persons in developing nations and proposals intended to

demonstrate the feasibility of converting nonfat dry milk to

casein for domestic and export use.

(b) Each plan or project authorized under § 1150.161(a)

shall be periodically reviewed or evaluated by the Board to

86a

insure that the plan or project contributes to an effective

program of promotion, research and nutrition education. If it

is found by the Board that any such plan or project does not

further the purposes of the Act, the Board shall terminate

such plan or project.

make use of unfair or deceptive acts or practices with respect

to the quality, value or use of any competing product.

§ 1150.171 Reports.

Each producer marketing milk of that producer’s own

production directly to consumers and each person making

payment to producers and responsible for the collection of the

assessment under § 1150.152 shall be required to report at the

time for remitting assessments to the Board such information

as may be required by the Board or by the Secretary. Such

information may include but not be limited to the following:

(a) The quantity of milk purchased, initially transferred

or which, in any other manner, are subject to the collection of

the assessment;

(b) The amount of assessment remitted;

less than the number of hundredweights of milk multiplied by

15 cents; and

(d) The date any assessment was paid.

§ 1150.172 Books and records.

Each person who is subject to this subpart, and other

persons subject to § 1150.171, shall maintain and make

available for inspection by employees of the Board and the

Secretary such books and records as are necessary to carry

out the provisions of this subpart and the regulations issued

hereunder, including such records as are necessary to verify

87a

any reports required. Such records shall be retained for at

least two years beyond the fiscal period of their applicability.

§ 1150.173 Confidential treatment.

All information obtained from such books, records or

reports under the Act and this subpart shall be kept con-

fidential by all persons, including employees and former

employees of the Board, all officers and employees and all

former officers and employees of the Department, and by all

officers and all employees and all former officers and

employees of contracting agencies having access to such

information, and shall not be available to-Board members.

Only those persons having a specific need for such

information in order to effectively administer the provisions

of this subpart shall have access to such information. In

addition, only such information so furnished or acquired as

the Secretary deems relevant shall be disclosed by them, and

then only in a suit or administrative hearing brought at the

discretion, or upon the request, of the Secretary, e- = which

the Secretary or any officer of the United States is a party,

and involving this subpart. Nothing in this section shall be

deemed to prohibit:

(a) The issuance of general statements based upon the

reports of the number of persons subject to this subpart or

Statistical data collected therefrom, which statements do not

identify the information furnished by any person; and

(b) The publication, by direction of the Secretary, of the

name of any person who has been adjudged to have violated

this subpart, together with a statement of the particular

provisions of the subpart violated by such person.

§ 1150.181 Proceedings after termination.

(a) Upon the termination of this subpart, the Board shall

recommend not more than five of its members to the

Secretary to serve as trustees for the purpose of liquidating

the affairs of the Board. Such persons, upon designation by

88a

the Secretary, shall become trustees of all the funds and

property owned, in the possession of, or under the control of

the Board, including unpaid claims or property not delivered

or any other claim existing at the time of such termination.

(b) The said trustees shall:

(1) Continue in such capacity until discharged by the

Secretary;

(2) Carry out the obligations of the Board under any |

contract or agreements entered into by it pursuant to

§ 1150.140(i);

(3) From time to time account for all receipts and

disbursements and deliver all property on hand, together with

all books and records of the Board and of the trustees, to such

persons as the Secretary may direct; and

(4) Upon the request of the Secretary, execute such

assignments or other instruments necessary or appropriate to

vest in such persons full title and right to all of the funds,

property, and claims vested in the Board or the trustees

pursuant to this subpart.

been transferred or delivered pursuant to this subpart shall be

subject to the same obligation imposed upon the Board and

upon the trustees.

(d) Any residual funds not required to defray the necessary

expenses of liquidation shall be turned over to the Secretary

to be used, to the extent practicable, in the interest of

continuing one or more of the promotion, research or

nutrition education plans or projects authorized pursuant to

this subpart.

§ 1150.182 Effect of termination or amendment.

Unless otherwise expressly provided by the Secretary, the

termination of this subpart or of any regulation issued

89a

pursuant hereto, or the issuance of any amendment to either

thereof, shall not:

(a) Affect or waive any right, duty, obligation, or lia-

bility which shall have arisen or which may hereafter arise in

connection with any provision of this subpart or any

regulation issued thereunder;

(b) Release or extinguish any violation of this subpart or

any regulation issued thereunder; or

States, or of the Secretary, or of any person, with respect to

any such violation.

§ 1150.183 Personal liability.

No member or employee of the Board shall be held

personally responsible, either individually or jointly, in any

way whatsoever to any person for errors in judgment,

mistakes, or other acts of either commission or omission of

such member or employee, except for acts of dishonesty or

willful misconduct.

§ 1150.184 Patents, copyrights, inventions and publica-

tions. ;

Any patents, copyrights, trademarks, inventions or pub-

lications developed through the use of funds collected under

the provisions of this subpart shall be the property of the U.S.

Government as represented by the Board, and shall, along

with any rents, royalties, residual payments, or other income

from the rental, sale, leasing, franchising, or other uses of

such patents, copyrights, inventions, or publications, inure to

the benefit of the Board. Upon termination of this subpart,

§ 1150.181 shall apply to determine disposition of all such

property.

90a

§ 1150.185 Amendments.

The Secretary may from time to time amend provisions of

this part. Any interested person or organization affected by

the provisions of the Act may propose such amendments to

the Secretary.

§ 1150.186 Separability.

If any provision of this subpart is declared invalid or the

applicability thereof to any person or circumstances is held

invalid, the validity of the remainder of this subpart or the

applicability thereof to other persons or circumstances shall

not be affected thereby.

§ 1150.187 Paperwork Reduction Act assigned number.

The information collection and recordkeeping requirements

contained in §§ 1150.135, 1150.152, 1150.153, 1150.171,

1150.172, 1150.202, 1150.204, 1150.205, 1150.211 and

1150.273 of these regulations (7 CFR Part 1150) have been

approved by the Office of Management and Budget (OMB)

under the provisions of 44 U.S.C. Chapter 35 and have been

assigned OMB Control Number 0581-0147.

9la

APPENDIX F

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF PENNSYLVANIA

[Filed Jun. 14, 2002]

No. 3:02cv00529

(Judge McClure)

JOSEPH S. COCHRAN, ef ai.,

Plaintiffs,

ANN M. VENEMAN, Secretary of Agriculture, ef ai,

Defendants.

Pursuant to LR 56.1, defendants hereby state that there is

no genuine issue to be tried as to the following material facts:

1. The economics of the dairy industry are governed by

two “distinctive and essential phenomena.” Zuber v. Allen,

396 U.S. 168, 172 (1969).

2. Milk can be used as “a fluid staple of daily consumer

diet” or as “an ingredient in manufactured dairy products

such as butter and cheese.” /d.

3. “Milk used in the consumer market has traditionally

commanded a premium price, even though it is of no higher

quality than milk used for manufacture.” /d.

4. Dairy cows are more productive in the summer than in

the winter. /d. at 172-73.

5. Because the demand for fluid milk is relatively constant

throughout the year, milk producers must maintain herds that

are sufficiently large to “supply winter needs;” their doing so

results in “oversupply in the more fruitful months.” /d. at 173.

92a

6. Over the years, the above phenomena have led to

“disorderly marketing conditions and depressed prices.”

Smyser v. Block, 760 F.2d 5 14, 5 15 (3d Cir. 1985).

7. To “restore order to the market and boost the purchasing

power of farmers,” Congress has taken repeated action. See,

eg., Zuber, 396 U.S. at 174-76.

8. In 1949, Congress created a federal price support

program for milk. Agricultural Act of 1949, ch. 792, § 201,

63 Stat. 1052. —_—

9. The creation of the price support program arose from

concern that the “extraordi

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