Appendix — Cal-Almond, Inc. v. Department of Agriculture

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IN THE

Supreme Court of the United States

CAL-ALMOND, INC., BAL NUT INC., CENTRAL VALLEY

GROWER PACKING, HOCKER NUT FARM, JARDINE

ORGANIC RANCH, ROTTEVEEL ORCHARDS, THERON

SHAMOCHIAN INC., BEARDS QUALITY NUT CO.,

AMARETTO ORCHARDS and CARLSON FARMS,

Petitioners,

U.S. DEPARTMENT OF AGRICULTURE,

Respondent.

On PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

APPENDIX

BRIAN C. LEIGHTON MICHAEL W. MCCONNELL

701 Pollasky Avenue Counsel of Record

Clovis, California 93612 SHARON SWINGLE

(559) 297-6190 May er, BROWN & PLATT

1909 K Street, N.W.

Washington, D.C. 20006

(202) 263-3000

Attorneys for Petitioners

157664 @) Counsel Press LLC

(800) 274-3321 + (800) 359-6859

TABLE OF APPENDICES

Appendix A — Opinion Of The United States Court

Of Appeals For The Ninth Circuit Dated And Filed

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Appendix B — Order Of The United States District

Court For The Eastern District Of California

Granting Defendant’s Motion To Dismiss Dated

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Appendix C — Judgment Of The United States

District Court For The Eastern District Of

California Dated And Filed August 14, 1998 ...

Appendix D — Decision And Order Of The United

States Department Of Agriculture Dated

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Appendix E — Decision And Order Of The United

States Department Of Agriculture Dated June 15,

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Appendix F — Opinion Of The United States Court

Of Appeals For The Ninth Circuit Dated And

Decided December 22, 1993 ...............-

Appendix G — Order Of The United States Court

Of Appeals For The Ninth Circuit Denying

Petition For Rehearing Dated And Filed

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Page

12a

22a

23a

228a

Appendices

Page

Appendix H — Relevant Statutes .............. 276a

Appendix | Relevant Post-1993 Almond

Marketing Order Regulations ................ 293a

Appendix J — Pre-1994 Almond Marketing Order

Advertising Regulations 7 C.F.R. §§ 981.41 And

I re rr ON SOT ee 309a

(Ak Cte th an Sy

APPENDIX A — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

DATED AND FILED SEPTEMBER 21, 1999

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

No. 98-16921

D.C. No. CV-98-05049-REC/SMS

CaL-ALMOND INc.; GoLtp HiILLs Nut CoMPANY INc.; FRAZIER

Nut Farms Inc.; BAL Nut INc.; CENTRAL VALLEY GROWER

PACKING; HocKER Nut FARM; JARDINE ORGANIC RANCH;

ROTTEVEEL ORCHARDS; THERON SHAMOCHIAN Inc.; BEARDS

QuaLity Nut Co.; AMARETTO ORCHARDS; CARLSON FARMS,

Plaintiffs-Appellants,

Vv.

U.S. DEPARTMENT OF AGRICULTURE,

Defendant-Appellee.

OPINION

Appeal from the United States District Court

for the Eastern District of California

Robert E. Coyle, Chief District Judge, Presiding

Argued and Submitted

July 14, 1999 — San Francisco, California

Filed September 21, 1999

Appendix A

Before: Stephen Reinhardt, Diarmuid F. O’Scannlain and

William A. Fletcher, Circuit Judges.

Opinion by Judge O’Scannlain

* * *

OPINION

O’SCANNLAIN, Circuit Judge:

We must decide whether an almond marketing order

violates the First Amendment by imposing mandatory

assessments on individual almond handlers to fund collective

generic almond promotion.

Cal-Almond, Inc., et al. (collectively “Cal-Almond’”’),

are almond handlers subject to an almond marketing order

(“Almond Order’) issued by the United States Department

of Agriculture (“USDA”) pursuant to the Agricultural

Marketing Agreement Act, 7 U.S.C. §§ 601 et seq. (“Act”).

The Almond Order imposes assessments upon handlers based

on the tonnage of almonds handled, and a substantial portion

of the assessments is used to fund generic advertising,

promotion, and marketing of almonds. The Almond Order

affords almond handlers the option of directly advertising

their own products in certain specified ways, for which they

can receive credit against their assessments. More

specifically, credit can be received for promotional activities,

such as advertising directed at “end users, trade or industrial

Appendix A

users,” 7 C.F.R. § 981.441(e)(4)(i), so long as “(t]he clear

and evident purpose of each activity shall be to promote the

sale, consumption or use of California almonds,” id.

§ 981.441(e)(2). Prior to the 1993-94 crop year, handlers

could receive 100% credit for their own direct advertising

pursuant to the “creditable” advertising program. Beginning

with the 1993-94 crop year, handlers could receive only

two-thirds credit for their own direct advertising pursuant to

the “credit-back” advertising program. See id. § 981.441(a).

Cal-Almond filed an administrative petition with the

USDA alleging that the creditable and credit-back advertising

programs violated its First Amendment rights. The ALJ

upheld Cal-Almond’s First Amendment challenge to the

advertising programs, relying on our decision in Cal-Almond

Inc. v. U.S. Dept. of Agriculture, 14 F.3d 429 (9th Cir. 1993)

(“Cal-Almond I’), which held that the creditable almond

advertising program constituted compelled speech that

violated the almond handler’s First Amendment rights, see

id. at 440. Both parties appealed the ALJ’s decision to the

USDA’s judicial officer, who stayed the proceedings pending

the Supreme Court’s decision in Glickman v. Wileman

Brothers & Elliott, Inc., 521 U.S. 457 (1997) (“Wileman’’).

in Wileman, the Court upheld mandatory assessments

for generic advertising of California tree fruits as “a species

of economic regulation that should enjoy the same strong

presumption of validity that we accord to other policy

judgments made by Congress.” /d., 521 U.S. at 477. In turn,

the Supreme Court granted certiorari in Cal-Almond I,

vacated this court’s decision, and remanded for

reconsideration in light of Wileman. See United States Dept.

ii i

Appendix A

of Agriculture v. Cal-Almond, Inc., 521 U.S. 1113 (1997)

(“Cal-Almond IT’). We, in turn, remanded Cal-Almond I to

the district court with instructions to dismiss the First

Amendment challenges to the advertising programs, citing

Wileman. See Cal-Almond, Inc. v. Dept. of Agriculture, No.

94-17160 (9th Cir. Sept. 4, 1997) (“Cal-Almond IIT’).

In light of the Supreme Court’s decision in Wileman and

Cal-Almond II, and our remand for dismissal in Cal-Almond

III, the USDA’s judicial officer reversed the ALJ’s decision

in this case and held that Wileman foreclosed Cal-Almond’s

First Amendment claims. Cal-Almond sought review in the

United States District Court for the Eastern District of

California, which also held that Cal-Almond’s claims were

foreclosed by Wileman. Cal-Almond subsequently brought

this appeal.

Cal-Almond asserts that the Wileman analysis does not

apply here because the Supreme Court considered the

constitutional validity of purely mandatory assessments for

generic advertising, while this case concerns the

constitutional validity of assessments for generic advertising

that are not purely mandatory because credit against the

assessments is provided for certain forms of branded

advertising. In Gallo Cattle Co. v. California Milk Advisory

Bd.,__ F.3d __ (9th Cir. July 14, 1999) (“Gallo”), we

explained that, in order “[t]o determine whether Wileman is

dispositive of the claims asserted by [a party], we will go

through the same analytical steps that the Court used in

Wileman.” Id. at__ (applying Wileman analysis and rejecting

Appendix A

First Amendment challenge to mandatory assessments

imposed under dairy promotion program that included

generic and branded advertising). Thus, in order to determine

whether Wileman is dispositive here, we must again go

through the Wileman analytical steps.

Following Gallo’s lead, we first examine the statutory

scheme under which the mandatory assessments for almond

marketing were imposed to determine whether constraints

have been placed upon the handlers’ independent action. See

id. at___. After assessing the statutory context, we proceed

to Wileman’s tripartite test, which determines whether the

creditable and credit-back advertising programs abridge

Cal-Almond’s First Amendment rights, or are “instead part

of a ‘regulatory scheme’ subject to review only as an

economic regulation.” Jd. We must consider (1) whether the

advertising programs impose a restraint on Cal-Almond’s

freedom to communicate any message to any audience; (2)

whether the advertising programs compel Cal-Almond to

engage in any actual or symbolic speech; and (3) whether

the advertising programs compel Cal-Almond to endorse or

finance any political or ideological views that are not

germane to the purposes for which the compelled association

is justified. See id.

The Act confers on the Secretary of Agriculture the

power “to establish and maintain [ ] orderly marketing

conditions for agricultural commodities.” 7 U.S.C. § 602(1).

Pursuant to this mandate, the Secretary is empowered to

“[e]stablish or provid[e] for the establishment of production

Appendix A

research, marketing research and development projects

designed to assist, improve, or promote the marketing,

distribution, and consumption or efficient production of”

almonds, among other commodities. See id. § 608c(6)(1).

Thus, as in Gallo and Wileman, it would appear that the

almond handlers are “part of a broader collective enterprise

in which their freedom to act independently is already

constrained by the regulatory scheme,” id., 521 U.S. at 469,

nor, indeed, does Cal-Almond dispute in its briefs on appeal

whether handlers are so regulated.

Cal-Almond asserts that the assessments imposed under

the Almond Order restrict its freedom to communicate by

limiting the money that it has for advertising; most of

Cal-Almond’s other objections to the creditable and

credit-back advertising programs also boil down to the impact

that the assessments imposed under those programs have on

its advertising budget. Cal-Almond effectively concedes that

purely mandatory assessments would be constitutional under

Wileman, but asserts that the credit option renders the

assessments here unconstitutional. Cal-Almond contends that

because it is less likely to receive credit for advertising that

Suits its purposes, its advertising budget is limited as

compared to its competitors.

In Gallo, however, we expressly rejected the argument

that a decrease in a producer’s advertising budget constitutes

a limitation on speech, stating that “although the assessments

made under the Marketing Order may, as Gallo argues,

‘substantially reduce the amount of money Gallo has to spend

Appendix A

on its own advertising used to distinguish its own product,’

this ‘incidental effect of constraining the size of [Gallo’s]

advertising budget’ does not itself amount to a restriction

on speech.” /d. at __. This portion of our holding in Gallo

followed necessarily from Wileman, wherein the Supreme

Court made plain that “[t]he fact that an economic regulation

may indirectly lead to a reduction in a handler’s individual

advertising budget does not itself amount to a restriction on

speech.” 521 U.S. at 470.

The Almond Order does not impose a restraint on

Cal-Almond’s freedom to communicate because Cal-Almond

remains “free to advertise or otherwise communicate any

message that it desires in any manner that it desires to any

audience that it desires.” Gallo, __F.3dat__.Cal-Almond’s

assertion that the credit programs have a disparate impact

upon the various handlers’ advertising budgets is not relevant

to the Wileman analysis. As the Supreme Court made plain:

Similar criticisms might be directed at other

features of the regulatory orders that impose

restraints on competition that arguably disadvantage

particular producers for the benefit of the entire

market. Although one may indeed question the

wisdom of such a program, its debatable features

are insufficient to warrant special First Amendment

scrutiny.

Wileman, 521 U.S. at 474.

Appendix A

Cal-Almond asserts that the creditable and credit-back

programs compel speech because the Almond Board dictates

how individual handlers must conduct their direct advertising

if they wish to receive credit against their assessments. We

are not persuaded, however. Because almond handlers remain

free to choose whether and how to advertise directly, it cannot

be said to constitute compelled speech. Handlers can decline

to advertise directly and simply pay their assessments. They

can directly advertise in an attempt to receive credit against

their assessments. Or, they can directly advertise regardless

of whether they will receive credit. Cf Gallo, F.3dat__

(holding that the requirement that producers display

promotional seal in order to fully benefit from generic

advertising campaign did not constitute compelled speech

because producers remained “free to choose not to carry the

seal’’). Rather than supporting Cal-Almond’s assertion that

Wileman is distinguishable, the flexibility provided by the

creditable and credit-back programs instead supports the

conclusion that the assessments here are indeed

constitutional.

The program upheld in Wileman imposed purely

mandatory assessments and therefore provided little recourse

to those producers who objected to the messages

disseminated, questioned the wisdom of the way the

assessments were spent, or doubted the efficacy of generic

advertising. By contrast, the programs here potentially

accommodate objectors: handlers who object to generic

advertising or believe there is a more cost-effective means

of promoting almonds have the option of performing their

Appendix A

own direct advertising for which they may receive credit

against their assessments. Thus, the creditable and

credit-back programs potentially limit the extent to which

almond handlers must fund advertising to which they object,

and if the handlers cannot receive credit for their preferred

form of direct advertising, they can simply pay the

assessments and will be no worse off than the producers in

Wileman.

Cal-Almond attempts to distinguish Wileman based on

its objection to the messages funded by the assessments and

the messages for which credit may be received. As Gallo

makes plain, however, regardless of whether Cal-Almond

has legitimate ideological objections to those messages, those

objections do not render the advertisements compelled

speech in violation of the First Amendment so long as the

messages are germane to the purposes of the Almond Order

and the Act. See id., _ F.3d at __. Here, there can be no

dispute that messages, generic or branded, promoting almond

Sales are germane to the Almond Order’s and the Act’s

purpose, which is “to assist, improve, or promote the

marketing, distribution, and consumption” of almonds.

7U.S.C. § 608c(6)(1); cf, Wileman, 521 U.S. at 476 (“Generic

advertising is intended to stimulate consumer demand for

an agricultural product in a regulated market. That purpose

is legitimate and consistent with the regulatory goals of the

overall statutory scheme.”); Gallo, __F.3dat_ (“The [ ]

employment of a generic advertising campaign of California

Milk and dairy products . . . is obviously ‘germane’ to [the

California dairy marketing order’s] purposes.”’). |

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10a

Appendix A

Moreover, at base, Cal-Almond’s objections to the

advertising programs and the assessments imposed

thereunder do not appear to be ideological or “to engender

any crisis of conscience.” Wileman, 521 U.S. at 472. Instead,

Cal-Almond questions the effectiveness of the advertising

programs and the messages funded by the assessments. More

specifically, Cal-Almond objects to the Almond Board’s

generic advertising for snack almonds, because Cal-Almond

does not sell snack almonds. Wileman, however, makes plain

that Such challenges to the wisdom or effectiveness of a

promotional program raise questions of economic policy,

rather than questions of constitutional import:

Neither the fact that respondents may prefer to

foster [a] message independently in order to

promote and distinguish their own products, nor

the fact that they think more or less money should

be spent fostering it, makes this case comparable

to those in which an objection rested on political

or ideological disagreement with the content of

the message. The mere fact that objectors believe

their money is not being well spent “does not

mean [that] they have a First Amendment

complaint.”

Id. (quoting Ellis v. Railway Clerks, 466 U.S. 435, 456

(1984)).

Cal-Almond also objects to the provision of credit

against the assessments for branded direct advertising. In

Gallo, we were presented with a similar objection to the use

of assessments to fund promotional activities that were not

generic, but rather branded, and thus promoted certain brands

lla

Appendix A

to the exclusion of others. Following Wileman, we rejected

the objection as irrelevant to the constitutionality of the

advertising program, stating that “[t]his claim, ‘while perhaps

calling into question the administration of portions of the

program, [has] no bearing on the validity of the entire

program.’ Gallo, — F.3dat__ (quoting Wileman, 521 U.S.

at 468).

Similarly here, Cal-Almond’s objections have no bearing

on the constitutionality of the creditable and credit-back

programs, but rather, call into question the administration

of those programs. Because those programs do not compel

speech or the endorsement of non-germane messages, leaving

Cal-Almond free to advertise however it desires, the Almond

Order is “a species of economic regulation that should enjoy

the same strong presumption of validity that we accord to

other policy judgments made by Congress.” Wileman, 521

U.S. at 477.

II]

Lastly, Cal-Almond asserts that Cal-Almond | is

dispositive. However, in light of the Supreme Court’s remand

in Cal-Almond II and our subsequent remand for dismissal

in Cal-Almond III, Cal-Almond I has been implicitly

overruled.

For the foregoing reasons, the Almond Order does not

abridge Cal-Almond’s First Amendment rights.

AFFIRMED.

12a

APPENDIX B — ORDER OF THE UNITED STATES

DISTRICT COURT FOR THE EASTERN DISTRICT OF

CALIFORNIA GRANTING DEFENDANT’S MOTION

TO DISMISS DATED AND FILED AUGUST 13, 1998

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

No. CV-F-98-5049 REC SMS

CAL-ALMOND, INC., et al.,

Plaintiffs,

THE UNITED STATES DEPARTMENT

OF AGRICULTURE,

Defendant.

ORDER GRANTING DEFENDANT’S

MOTION TO DISMISS

I. Introduction

On January 13, 1998, Plaintiff Cal-Almond, Inc. (“Cal-

Almond’) and eleven other almond handlers (collectively,

“Plaintiffs”) filed a complaint against the United States

Department of Agriculture (“USDA” or “Defendant’”)

seeking, inter alia, a declaration that the Almond Marketing

Order (“AMO”), 7 C.F.R. Part 981, violates Plaintiffs’ First

Amendment rights under the United States Constitution. On

May 4, 1998, this court heard Defendant USDA’s motion to

13a

Appendix B

dismiss the complaint on the grounds that the recent Supreme

Court decision in Glickman v. Wileman Bros. & Elliot, Inc.,

__ U.S. __, 117 S. Ct. 2130 (1997), which held a similar

marketing order program not to violate the First Amendment,

controls the outcome of this case. For the following reasons,

this court grants the USDA’s motion, and denies Plaintiffs

leave to amend.

Il. Background

A. The Almond Marketing Order

The Almond Marketing Order, 7 U.S.C. Part 981, was

promulgated by the Secretary of Agriculture pursuant to the

Agricultural Marketing Agreement Act (“AAMA”), 7 U.S.C.

§§ 601, ef seg., with the goal of Stabilizing the almond

industry. See Defendant’s Opening Brief at 2. The Almond

Order is administered by an Almond Board, consisting of

ten members, who are nominated by almond growers and

handlers and appointed by the Secretary of Agriculture. See

7 C.F.R. §§ 981.41; 981.441.

All handlers of almonds, who are regulated under the

Order, are liable for assessments to finance the administrative

expenses of the Board, and to cover the cost of research,

generic advertising, and promotion. The assessment rate,

which can vary annually, is currently set at 2 cents per pound

of assessable almonds. See 7 C.F.R. § 981.343, 62 Fed. Reg.

43459.

Plaintiffs challenge that part of the AMO that imposes

assessments for the funding of almond advertising and

14a

, Appendix B

promotion. The promotion program is as follows. A portion

of the assessment per pound of almonds went to the Almond

Board, who then used it to fund generic promotion and

advertisement of California almonds. However, at all relevant

times, Plaintiffs could obtain credit against that portion of

the assessment that went to fund generic advertising by

spending money to promote their own brand of almonds in

certain, specified ways. This program of advertising-

promotion credits took two forms: (1) the “creditable”

program, in place from 1986 — 1993; and (2) the “credit-back”

program, in place from 1993 to the present.' The regulation

governing the “creditable” program is 7 C.F.R. § 981.441

(1990). The regulation governing the “credit-back” program

is 7 C.F.R. § 981.441 (1996). The court now turns to a

discussion of these programs.

1. The “Creditable”’ Program

Under the “creditable” program, almond handlers could

obtain 100% credit against the generic-advertising

assessment. However, certain kinds of advertising were not

eligible for the credit. For example, under the “creditable”

program, no credit was available for money spent to advertise

products containing almonds, unless the product contained

at least 50% raw shelled almonds by weight, and unless the

almond product displayed the handler’s own brand. The

program also gave no credit for money spent on advertising

when more than two complimentary branded products were

included in an advertisement, nor when the advertisement

promoted not only California almonds, but also non-

1. Plaintiffs do not challenge assessments imposed after 1995.

eee

15a

Appendix B

complementary commodities or products, or competing nuts.

Finally, no credit was available for money spent promoting

retail outlets.

2. The “Credit-Back” Program

The “credit-back” program simultaneously expanded the

ways in which almond handlers could receive credit for

promoting their own brands and reduced the amount of credit

it was possible to receive.

Generally, the “credit-back” program reduced the 100%

credit to 2/3rds credit. The handlers therefore had to spend

$150,000 to earn the $100,000 credit. The “credit-back”

program removed the restrictions on credit for promoting

almond-containing products, but limited the credit obtainable

by the general 2/3rds, as well as by a function of the

percentage of almonds in the product. For example, if a

handler spent $150,000 to promote a product containing 20%

almonds, the amount of the credit would be as follows:

$150,000 reduced by 2/3rds = $100,000 x 20% = $20,000.

Although the “credit-back” program expanded the

promotions that could receive credit, restrictions remained.

For example, a handler could not obtain credit for advertising

in a publication that targeting the farming or the grower trade.

Also, there was no credit available for billboard

advertisements, unless the advertisement directed consumers

to a handler-operated outlet offering direct purchase of

almonds. Finally, travel expenses were not creditable even

if the travel involved meeting with a buyer to convince him

to purchase almonds.

16a

Appendix B

In addition to these specific restrictions, the program

provided generally that a handler could not receive credit

unless it was “appropriate when compared to accepted

professional practices and rates for the type of activity

conducted.” 7 C.F.R. § 981.441(e)(1) (1996). “The clear and

evident purpose of each activity [had to] be to promote the

sale, consumption, or use of California almonds, and nothing

. .. [could] detract from this purpose.” /d. at (e)(2). Whether

a particular promotion could be eligible for credit was

decided initially by the Almond Board Staff. See id. at (e)(6).

That initial decision could be appealed to the public relations

and advertising committee of the Board, and then to the

Secretary of Agriculture. See id.

B. Plaintiffs’ Claim For Relief

Plaintiffs allege that the assessment program violates

their First Amendment rights for three reasons. First, they

allege that the restrictions on Plaintiffs’ advertising and

promotion violated Plaintiffs’ rights to freedom of speech

and association. Second, they allege that Board approval of

advertising constituted a prior restraint on speech. Third, both

the “creditable” and the “credit-back” advertising programs

placed unconstitutional conditions on a government benefit.

Plaintiffs’ primary concern with both the “creditable”

and the “credit-back” programs is that the types of advertising

on which credit was allowed were essentially useless to them,

because Plaintiffs sell mostly processed almonds to be used

as ingredients in other products. The only handlers who can

make good use of the credits are sellers of packaged snack

almonds, such as Blue Diamond. Forcing them to contribute

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[7a

Appendix B

to the generic advertising fund, Plaintiffs allege, had two

effects: (1) it reduced the overall assessments on handlers

who sell mostly packaged snack almonds, such as Blue

Diamond; and (2) it forced handlers who sell mostly

ingredient almonds, such as Plaintiffs, to match the

snack-almond producers’ advertising budget. According to

Plaintiffs, the powerful Blue Diamond company influenced

the “creditable” and the “credit-back” advertising programs

fo serve exactly this purpose. Moreover, Plaintiffs are not

the only ones that advance this theory. Both the

Administrative Law Judge below and the Ninth Circuit found

that the advertising programs at issue were designed to

benefit Blue Diamond. See ALJ Opinion at 10-11, attached

as exhibit to Plaintiffs’ complaint; Cal-Almond, Inc. v. U.S.

Dept. of Agriculture, 14 F.3d 429, 438-440 (9th Cir. 1994).

C. Cal-Almond I

The present matter does not represent the first time this

court has heard a First Amendment challenge to this AMO.

On February 20, 1991, a number of different almond handlers

—— plus some of the same handlers involved in this Case, as

will be discussed more fully below — filed a complaint that

attacked the AMO on a number of grounds, including that it

violated the First Amendment. The ALJ and the Judicial

Officer for the Secretary of Agriculture both ruled that the

AMO did not violate the First Amendment. This court

affirmed that ruling based on the following reasoning:

The court concludes that the creditable advertising

assessments do not implicate First Amendment

rights because plaintiffs are not ‘compelled’ to

18a

Appendix B

advertise. Section 608c(6)(1) authorizes marketing

orders to provide for ‘production research [and]

marketing research and development projects,’

including ‘projects ... provid[ing] for crediting

the pro rata expense assessment obligations of a

handler with all or any portion of his direct

expenditures for such marketing promotion

including paid advertising as may be authorized

by the order... .” The Almond Marketing Order

contains regulations, duly promulgated through

formal on-the-record rulemaking, which authorize

the Almond Board to establish market development

projects including paid advertising, 7 C.F.R.

§ 981.14, to credit a portion of a handler’s direct

expenditures for market promotion, including paid

advertising, for the sale of almonds, and to

prescribe appropriate rules and regulations as are

necessary to effectively regulate the crediting of

the pro rata expense assessment of handlers,

7 C.F.R. § 981.41(c). The regulations do not

permit plaintiffs to receive a credit against their

annual assessment unless their advertising

complies with the regulations regarding creditable

advertising, but do not compel plaintiffs to

participate in advertising because plaintiffs are

otherwise free to engage in any advertising they

wish without interference with the Almond Board.

As the Department argues, however, the Board

is not obligated to subsidize any and all

advertising that plaintiffs choose to engage in.

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19a

Appendix B

Cal-Almond, Inc. v. U.S. Dept. of Agriculture, No.

CV-F-91-122 REC, slip op. at 7 (E.D. Cal. June 3, 1992)

(order affirming the decision of the Secretary of Agriculture).

The Ninth Circuit reversed this court’s decision in a

published opinion. See Cal-Almond, Inc. y. U.S Dept. of

Agriculture, 14 F.3d 429 (9th Cir. 1993). The Ninth Circuit

first found that the AMO regulations implicated the

plaintiffs’ First Amendment rights because they “compelled”

the plaintiffs to speak, either by forcing them to subsidize

generic advertising, or by forcing them to choose creditable

advertising. See id. at 434-436. After finding that the

plaintiffs’ First Amendment rights were implicated, the Ninth

Circuit subjected the regulations to the test announced in

Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n

of N.Y., 447 U.S. 557 (1980). The Ninth Circuit concluded

that the AMO regulations failed the Central Hudson test

because the regulations did not directly advance the USDA’s

interests in assisting, improving, or promoting the marketing,

distribution, and consumption of almonds. See id. at 436-439.

On October 6, 1996, the Supreme Court denied certiorari,

see Cal-Almond, Inc. v. U.S. Dept. of Agriculture, 117

S. Ct. 72 (1996), but after the Wileman decision, the Court

granted certiorari, vacated the judgment of the Ninth Circuit,

and instructed the Ninth Circuit to reconsider its decision in

light of Wileman. This court received what it thought was

the official mandate of the Ninth Circuit instructing it to

dismiss the First Amendment claim of the Cal-Almond

plaintiffs. This court did so on September 16, 1997. However,

this court reconsidered and vacated that order on October 1,

1997, because pursuant to Federal Rule of Appellate

20a

Appendix B

Procedure 41 and 42, this court did not have jurisdiction in

this matter. The Ninth Circuit on March 24, 1998, issued an

order granting the plaintiffs’ motion for a stay of mandate

until June 1, 1998. On July 22, 1998, the mandate from the

Ninth Circuit issued, instructing this court to dismiss the

First Amendment claims in Cal-Almond I. The Ninth Circuit

cited Wileman in support of its mandate.

Four of the 12 Plaintiffs in this matter, Cal-Almond, Gold

Hills Nut Co., Frazier Nut Farms, Inc., and Carlson Farms,

are also parties to Cal-Almond I. For that reason, these four

plaintiffs are not challenging the “creditable” program.

III. Analysis - -

Although the Ninth Circuit did not issue a published

opinion with its mandate, this court believes that it is clear

that the Ninth Circuit has found that Wileman bars a First

Amendment challenge to the “creditable” advertising

program. Because the “creditable” program is legally

indistinguishable from the “credit-back” program, as far as

the Wileman analysis is concerned, this court concludes that

the Ninth Circuit would also find that the Wileman case bars

the challenges to the “credit-back” program. Accordingly,

this court will dismiss the First Amendment challenges to

both programs.

IV. Conclusion

In accordance with the foregoing, IT IS ORDERED that

Plaintiffs’ complaint is DISMISSED. Leave to amend is

DENIED, because in the face of a controlling Supreme Court

Se a ae

21a

Appendix B

decision, amendment would be futile. The Clerk of the Court

is directed to enter judgment in favor of Defendant.

Dated: August 13th, 1998

s/ Robert E. Coyle

ROBERT E. COYLE

UNITED STATES DISTRICT

JUDGE

22a

APPENDIX C — JUDGMENT OF THE UNITED

STATES DISTRICT COURT FOR THE EASTERN

DISTRICT OF CALIFORNIA DATED AND

FILED AUGUST 14, 1998

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

CV-F-98-5049 REC/SMS

CAL-ALMOND, INC., et al,

Plaintiffs,

VS.

UNITED STATES DEPARTMENT

OF AGRICULTURE,

Defendant.

JUDGMENT IN A CIVIL ACTION

DECISION BY COURT: This action came to trial or

hearing before the Court. The issues have been tried or heard

and a decision has been rendered.

IT IS HEREBY ORDERED AND ADJUDGED that

JUDGMENT IS ENTERED in favor of Defendant.

DATED: 8/14/98

JACK L. WAGNER, Clerk

By: s/ [illegible]

Deputy Clerk

23a

: APPENDIX D — DECISION AND ORDER OF THE

i UNITED STATES DEPARTMENT OF AGRICULTURE

DATED DECEMBER 24, 1997

UNITED STATES DEPARTMENT OF AGRICULTURE

BEFORE THE SECRETARY OF AGRICULTURE

94 AMA Docket No. F&V 981-]

In re:

Cal-Almond, Inc., Gold Hills Nut Company, Inc.,

and Frazier Nut Farms, Inc.,

Petitioners

AND

94 AMA Docket No. F&V 981-3

In re:

Del Rio Nut Company and Monte Vista

Farming Company,

| Petitioners

| AND |

94 AMA Docket No. F&V 981-4

| In re:

Bal Nut, Inc., Carlson Farms, Central Valley Grower

: Packing, Hocker Nut Farm, Jardine Organic Ranch,

: and Rotteveel Orchards,

Petitioners

wade \ hy ple! « ~~ wae re

24a

Appendix D

AND -

94 AMA Docket No. F&V 981-5

In re:

Treehouse Farms, Inc.,

Petitioners

AND

94 AMA Docket No. F&V 981-7

In re:

Theron Shamgochian, Inc., d/b/a Monte Cristo Packing

Company, formerly known as Monte Cristo Packing Company

and Theron Shamgochian Ranches, Inc., d/b/a Monte Cristo

Packing Company, but known always to the Almond Board for

the subject crop years as Monte Cristo Packing Company;

Beard’s Quality Nut Company, a sole proprietorship; and

Amaretto Orchards, a California general partnership,

Petitioners

Decision and Order

Cal-Almond, Inc., Gold Hills Nut Company, Inc., and

Frazier Nut Farms, Inc., instituted the proceeding captioned

94 AMA Docket No. F&V 981-1 on January 25, 1994;

Del Rio Nut Company and Monte Vista Farming Company

Sabiadtbhalvesahasietna state

NR raed te A ieee ada

25a

Appendix D

instituted the proceeding captioned 94 AMA Docket No.

F&V 981-3 on February 25, 1994; Treehouse Farms, Inc.,

instituted the proceeding captioned 94 AMA Docket No.

F&V 981-5 on May 24, 1994: Bal Nut, Inc., Carlson Farms, '

Central Valley Grower Packing, Hocker Nut Farm, Jardine

Organic Ranch, and Rotteveel Orchards instituted the

proceeding captioned 94 AMA Docket No. F&V 981-4 on

June 15, 1994; and Theron Shamgochian, Inc., d/b/a Monte

Cristo Packing Company, Beard’s Quality Nut Company,

and Amaretto Orchards, instituted the proceeding captioned

94 AMA Docket No. F&V 981-7 on September 20, 1994.?

Each proceeding was instituted by a Petition filed

pursuant to section 8¢,15)(A) of the Agricultural Marketing

Agreement Act of 1937, as amended (7 U.S.C. § 608c(15)(A))

{hereinafter the AMAA); the marketing order regulating

Almonds Grown in California (7 C.F.R. §§ 981.1-.474)

[hereinafter the Almond Order]; and the Rules of Practice

Governing Proceedings on Petitions To Modify or To Be

Exempted From Marketing Orders (7 C.F.R. §§ 900.50-.71)

1. On November 8, 1994, Carlson Farms requested to withdraw

its petition, and Chief Administrative Law Judge Victor W. Palmer

[hereinafter Chief ALJ] granted Carlson Farms’ request (Summary

of Telephone Conference, filed November 10, 1994).

2. Unless limited by the context in which it is used, the word

“Petitioners” in this Decision and Order refers to: Amaretto

Orchards, Bal Nut, Inc., Beard’s Quality Nut Company, Cal-Almond,

Inc., Central Valley Grower Packing, Del Rio Nut Company, Frazier

Nut Farms, Inc., Gold Hills Nut Company, Inc., Hocker Nut Farm,

Jardine Organic Ranch, Monte Vista Farming Company, Rotteveel

Orchards, Theron Shamgochian, Inc., d/b/a Monte Cristo Packing

Company, and Treehouse Farms, Inc.

26a

Appendix D

[hereinafter the Rules of Practice]. Each Petition alleges that

the advertising program conducted under the Almond Order

violates each respective Petitioner's right to freedom of

speech guaranteed under the First Amendment of the

Constitution of the United States, and each Petition seeks

relief from the requirement under the Almond Order that

handlers pay assessments for advertising. The First

Amendment challenge in each Petition is based, in large part,

on Cal-Almond, Inc. v. United States Dep't of Agric., 14 F.3d

429 (9th Cir. 1993).?

The Administrator of the Agricultural Marketing

Service, United States Department of Agriculture [hereinafter

Respondent], filed an Answer to each Petition: (1) stating

that the Petition fails to state a claim upon which relief can

be granted and the AMAA and the Almond Order, as

interpreted by Respondent and the Almond Board of

California, were, and are, in accordance with law; and

3. On June 27, 1997, the Supreme Court of the United States

vacated the judgment of the United States Court of Appeals for the

Ninth Circuit in Cal-Almond Inc. v. Department of Agric., 14 F.3d

429 (9th Cir. 1993), 67 F.3d 874 (9th Cir. 1995), and remanded the

case for further consideration in light of Glickman v. Wileman Bros.

& Elliott, Inc., 117 S. Ct. 2130 (1997). Department of Agric. v.

Cal-Almond, Inc., 117 S. Ct. 2501 (1997). On September 4, 1997,

the United States Court of Appeals for the Ninth Circuit remanded

Cal-Almond “to the district court with instruction to dismiss

Cal-Almond’s First Amendment claim.” (Respondent’s Memorandum

in Support of Motion to the Judicial Office [sic] to Vacate the

Findings of Facts, Factual Discussion, Conclusions of Law and Order

of the Administrative Law Judge and to Issue an Immediate Decision

[hereinafter Respondent’s Memorandum in Support of Motion for

Immediate Decision], Attachment C.)

27a

Appendix D

(2) requesting that the relief prayed for in the Petition be

denied and the Petition be dismissed.

Respondent filed three motions to consolidate the

proceedings captioned 94 AMA Docket No. F&V 981-1,

94 AMA Docket No. F&V 981-2,5 94 AMA Docket No.

F&V 981-3, 94 AMA Docket No. F&V 981-4, and 94 AMA

Docket No. F&V 981-5 on the ground that all of the Petitions

filed in the proceedings raise similar issues regarding the

Almond Order.® No Petitioner objected to Respondent’s

motions to consolidate, and the Chief ALJ granted each of

Respondent’s motions to consolidate.’ On September 20,

4. See: (1) Answer of Respondent, filed in the proceeding

captioned 94 AMA Docket No. F&V 981-1 on March 15, 1994;

(2) Answer of Respondent, filed in the proceeding captioned

94 AMA Docket No. F&V 981-3 on March 28, 1994; (3) Answer of

Respondent, filed in the proceeding captioned 94 AMA Docket No.

F&V 981-5 on June 21, 1994; (4) Answer of Respondent, filed in

the proceeding captioned 94 AMA Docket No. F&V 981-4 on July

14, 1994; and (5) Answer of Respondent, filed in the proceeding

captioned 94 AMA Docket No. F&V 981-7 on October 3, 1994.

5. On November 8, 1994, Dole DF&N, Inc., the only Petitioner

in the proceeding captioned 94 AMA Docket No. F&V 981-2,

requested to withdraw its Petition, and the Chief ALJ granted Dole

DF&N, Inc.’s request (Summary of Telephone Conference, filed

November 10, 1994).

€. See Respondent’s: (1) Motion to Consolidate Petitions, filed

April 18, 1994; (2) Motion to Consolidate Petitions, filed June 24,

1994; and (3) Motion to Consolidate Petitions, filed July 14, 1994,

7. See Chief ALJ’s: (1) Order of Consolidation, filed May 4,

1994; (2) Order of Consolidation, filed July 12, 1994: and (3) Order

of Consolidation, filed August 26, 1994.

28a

Appendix D

1994, Petitioners in the proceeding captioned 94 AMA

Docket No. F&V 981-7 filed a motion requesting

consolidation of the proceeding captioned 94 AMA Docket

No. F&V 981-7 with the proceeding captioned 94 AMA

Docket No. F&V 981-1, 94 AMA Docket No. F&V 981-2,"

94 AMA Docket No. F&V 981-3, 94 AMA Docket No, F&V

981-4, and 94 AMA Docket No. F&V 981-5.” On September

22, 1994, the Chief ALJ granted the motion for consolidation

filed by Petitioners in the proceeding captioned 94 AMA

Docket No. F&V 981-7 stating:

Petitioners in AMA Docket No. F& V 981-7,

have requested that their petition be consolidated

with the other consolidated petitions in 94 AMA

Docket Nos. F&V 981-1, 981-2, 981-3, D81-4 and

981-5.

Respondent and the other petitioners have

advised that there is no objection to the request

and the petitions in all the referenced cases are

hereby consolidated.

Order of Consolidation, filed September 22, 1994.

The Chief ALJ conducted an oral hearing on November

14, 1994, through November 17, 1994, in Fresno, California,

and on December 13, 1994, through December 16, 1994, in

Los Angeles, California. Mr. Brian C. Leighton, Esq., of the

8. See note 5.

9. See Petitioners’ Request for an Order Consolidation, and

Order Thereon, filed September 20, 1994.

Bie eit

Deh Dead deciten,

ers eee

BE eee ee Sa een safes

29a

Appendix D

Law Offices of Brian C, Leighton, Clovis, California, and

James A. Moody, Esq., Washington, D.C., represented

Amaretto Orchards, Bal Nut, Inc., Beard’s Quality Nut

Company, Cal-Almond, Inc., Central Valley Grower

Packing, Frazier Nut Farms, Gold Hills Nut Company, Inc.,

Hocker Nut Farm, Jardine Organic Ranch, Rotteveel

Orchards, and Theron Shamgochian, Inc., d/b/a Monte Cristo

‘acking Company. Mr. Jeffrey A. LeVee, Esq., of Jones,

Day, Reavis & Pogue, Los Angeles, California, represented

Treehouse Farms, Inc. Mr. Ronald W. Hillberg, Esq.,

Turlock, California, represented Del Rio Nut Company and

Monte Vista Farming Company. Ms. Tejal Mehta, Esq., and

M:. Gregory Cooper, Esq., of the Office of the General

Counsel, United States Department of Agriculture,

Washington, D.C., represented Respondent. The evidentiary

record consists of a 2,560-page transcript and approximately

300 exhibits. Forty-three witnesses testified.

On January 9, 1995, Blue Diamond Growers, Inc.

(a non-profit growers’ cooperative that markets almonds

regulated under the Almond Order), filed a Motion to

Intervene, and on January 27, 1995, Paramount arms, Inc.

(a handler of almonds regulated under the Almond Order),

filed a Motion to Intervene. On February 21, 1995, pursuant

to section 900.57 of the Rules of Practice (7 C.F.R. § 900.57),

the Chief ALJ granted the January 9, 1995, and January 27,

1995, motions to intervene permitting Blue Diamond

Growers, Inc., and Paramount Farms, Inc. [hereinafter

Intervenors], to file a joint brief,"

10. See Order Respecting Motions to Intervene by Blue

Diamond Growers and Paramount Farms, Inc., filed February 21,

1995,

30a

Appendix D

Petitioners, Intervenors, and Respondent filed

post-hearing briefs on March 24, 1995, and reply briefs on

May 9, 1995. The Chief ALJ issued a Decision and Order

{hereinafter Initial Decision and Order] on June 15, 1995.

The Chief ALJ, relying on Cal-Almond, Inc. v. United States

Dep't of Agric., 14 F.3d 429 (9th Cir. 1993),'' and applying

the test in Central Hudson Gas & Elec. Corp. v. Public

Service Comm'n, 447 U.S. 557 (1980), for evaluating the

constitutionality of commercial speech regulation,'’

11. See note 3.

12. The Supreme Court summarized the test for evaluating the

constitutionality of commercial speech regulation as follows:

In commercial speech cases, . . . a four-part analysis

has developed. At the outset, we must determine whether

the expression is protected by the First Amendment. For

commercial speech to come within that provision, it at

least must concern lawful activity and not be misleading.

Next, we ask whether the asserted governmental interest

- 1s substantial. If both inquiries yield positive answers,

we must determine whether the regulation directly

advances the governmental interest asserted, and

whether it is not more extensive than is necessary to

serve that interest.

Central Hudson Gas & Elec. Corp. v. Public Service Comm'n, 447

U.S. 557, 566 (1980).

The United States Court of Appeals for the Ninth Circuit,

applying the Central Hudson test to the almond marketing program,

in Cal-Almond states:

(Cont'd)

Cee ae ee

3la

Appendix D

concludes that: (1) Respondent has the burden of proof in

these proceedings; (2) Respondent has failed to meet its

burden of proving that the Almond Board’s advertising and

Promotional program for crop years 1986-87 through

1994-95 directly advanced the governmental interest of

selling more almonds and increasing returns to growers

which the United States Department of Agriculture asserted

in justification of its regulation of Petitioners’ commercial

speech; (3) Respondent has failed to meet its burden of

proving that the Almond Board’s advertising and

Promotional program for crop years 1986-87 through

1994-95 was no more extensive than necessary to serve the

governmental interest of selling more almonds and increasing

retums to growers which the United States Department of

Agriculture asserted in justification of its regulation of

Petitioners’ commercial speech; and (4) the Almond Board’s

advertising and promotional program for crop years 1986-87

through 1994-95 was not in accordance with law because

the program violates Petitioners’ right to freedom of speech

(Cont'd)

Once again, for the almond marketing program to

be constitutional, (a) the asserted government interest

behind it must be “substantial,” (b) the program must

“directly advance” that interest, and (c) the program

must not be more extensive than necessary to serve that

interest. Central Hudson, 447 U.S. at 566, 100 S. Ct. at

2351. USDA has the burden of justifying the program

by presenting evidence sufficient to satisfy these

requirements. Edenfield y. Fane, [507] U.S. [761],

[769], 113 S. Ct. 1792, 1800, 123 L.Ed. 2d 543 (1993).

Cal-Almond, Inc. v. United States Dep't of Agric., 14 F.3d 429, 437

(9th Cir. 1993).

32a

Appendix D

guaranteed by the First Amendment (Initial Decision and

Order at 69).

On July 19, 1995, Petitioners appealed to the Judicial

Officer to whom the Secretary of Agriculture has delegated

authority to act as final deciding officer in the Department’s

adjudicatory proceedings subject to 5 U.S.C. §§ 556 and 557

(7 C.F.R. § 2.35)."2 On August 4, 1995, Respondent filed

Respondent’s Appeal to the Judicial Officer [hereinafter

Respondent’s Appeal Petition]. On August 10, 1995,

Respondent filed Respondent’s Response to Petitioners’

Appeal to the Judicial Officer [hereinafter Respondent’s

Response]; on September 20, 1995, Petitioners filed

Petitioners’ Joint Response to Respondent’s Appeal to the

Judicial Officer; and on September 21, 1995, Petitioners filed

Petitioners’ Response to “Respondent’s Proposed Findings

of Fact and Conclusions of Law; Appeal of the ALJ’s

Findings of Fact and Conclusions of Law.”

On September 22, 1995, the case was referred to the

Judicial Officer for decision, and on May 15, 1996, I issued

an Order to Show Cause stating:

An examination of the Chief ALJ’s Decision

and Order and the appellate pleadings filed in the

consolidated proceeding, sub judice, reveals that

13. The position of Judicial Officer was established pursuant

to the Act of April 4, 1940 (7 U.S.C. §§ 450c-450g); section 4(a) of

Reorganization Plan No. 2 of 1953, 18 Fed. Reg. 3219, 3221 (1953),

reprinted in 5 U.S.C. app. § 4(a) at 1491 (1994); and section

212(a)(1) of the Department of Agriculture Reorganization Act of

1994 (7 U.S.C. § 6912(a)(1)).

See were eee

33a

Appendix D

any decision by the Judicial Officer herein would

have to be based upon the same First Amendment/

commercial free speech issues that are stil] being

litigated in the consolidated Wileman [footnote

omitted] and consolidated Cal-Almond [footnote

omitted] proceedings.

On January 24, 1996, the Solicitor General

of the United States, on behalf of the Secretary of

Agriculture, filed [a] Petition for a Writ of

Certiorari in the Supreme Court of the United

States seeking review of the United States Court

of Appeals for the Ninth Circuit’s judgment in

Wileman. Moreover, I have been informed that

the Department will likely request that the

Solicitor General file a petition for a writ of

certiorari regarding Cal-Almond. Consequently,

I am issuing this Order for the parties in the

proceeding, sub judice, to show cause why

I should not forestall my Decision and Order

herein, and await the outcome of proceedings for

judicial review of Wileman and Cal-Almond.

Therefore, the parties herein Shall, within

30 days from the service of this Order to Show

Cause, file with the Hearing Clerk any cause

showing why I should not await the outcome of

proceedings for judicial review of Wileman and

Cal-Almond before issuing a Decision and Order

in the instant case.

34a

Appendix D

On June 12, 1996, Blue Diamond Growers, Inc., filed

Response to Order to Show Cause stating that “[w]aiting

until the Supreme Court hands down its decision in [Wileman

and Cal-Almond] provides for the most efficient use of

judicial resources.” On June 14, 1996, Mr. Brian Leighton,

on behalf of Petitioners in 94 AMA Docket No. F&V 981-1,

94 AMA Docket No. F&V 981-3, 94 AMA Docket No.

F&V 981-4, and 94 AMA Docket No. F&V 981-7, filed

Petitioners’ Response to Judicial Officer’s Order to Show

Cause stating, inter alia, that the Supreme Court of the United

States had not granted review in Cal-Almond, Inc. v. United

States Dep’t of Agric., 14 F.3d 429 (9th Cir. 1993), that “the

Judicial Officer could render his decision based on the

controlling case, Cal-Almond, Inc. v. United States Dep't of

Agric., 14 F.3d 429 (9th Cir. 1993),” and that “the Judicial

Officer should not stay the proceedings pending the outcome

of the review [of Wileman and Cal-Almond] before the

Supreme Court[.]” On June 14, 1996, Respondent filed

Respondent’s Response to Show Cause Order stating that

Respondent “agrees that the Judicial Officer should await

the outcome of the Supreme Court review of Wileman before

issuing a Decision and Order herein.” On October 4, 1996, I

issued Ruling on Order to Show Cause stating that “[nJo

cause having been shown, | shall await the outcome of

proceedings for judicial review of Wileman and Cal-Almond

before issuing a Decision and Order in the instant case.”

On June 25, 1997, the Supreme Court of the United

States issued a decision in Glickman v. Wileman Bros.

& Elliott, Inc., 117 S. Ct. 2130 (1997), holding that the First

Amendment rights of persons compelled to fund generic

advertising of California nectarines, plums, and peaches, in

35a

Appendix D

accordance with Marketing Order 916 (7 C.F.R. pt. 916) and

Marketing Order 917 (7 C.F.R. pt. 917), both of which are

issued under the AMAA, are not implicated, much less

abridged. On June 27, 1997, the Supreme Court granted a

petition for a writ of certiorari in Cal-Almond, vacated the

Ninth Circuit’s judgment, and remanded the case to the

United States Court of Appeals for the Ninth Circuit for

further consideration in light of Glickman v. Wileman Bros.

& Elliott, Inc., 117 S. Ct. 2130 (1997). Department of Agric.

v. Cal-Almond, Inc., 117 S. Ct. 2501 (1997). On September

4, 1997, the United States Court of Appeals for the Ninth

Circuit remanded Cal-Almond “to the district court with

instruction to dismiss Cal-Almond’s First Amendment

claim.” (Respondent’s Memorandum in Support of Motion

for Immediate Decision, Attachment Set

On October 30, 1997, Respondent filed Respondent’s

Motion to the Judicial Officer to Vacate the Findings of Facts,

Factual Discussion, Conclusions of Law, and Order of the

Administrative Law Judge and to Issue an Immediate

Decision [hereinafter Respondent’s Motion for Immediate

Decision] contending that:

There is only one issue in this proceeding:

whether the almond marketing order and program

is unconstitutional under the free speech and free

association provisions of the First Amendment. .. .

This is one of the older proceedings of this nature

currently pending in the Department, and the

[R]espondent certainly believes that justice

always should be rendered as fast as can

reasonable [sic] be done. Furthermore, this is a

36a

Appendix D

case where petitioners are not in full compliance

and prompt handling of this matter should aid in

resolving this situation.

The record herein, however, presents a

technical problem with respect to prompt

adjudication. ... A complete review of this record

and a reconsideration of all of these points of

contention would be a heavy and time-consuming

burden on the Judicial Officer. Furthermore, it

appears to be unnecessary since the findings,

discussion and conclusions of the law judge are

no longer relevant. .

Under the Supreme Court reasoning in

Wileman and Cal-Almond Inc., the First

Amendment is not even implicated. Further, even

if there were any First Amendment issue, it would

only ask whether the promotion and advertising

of almonds is germane to the [AMAA] and the

[Almond] Order and whether the assessments are

used for political or ideological activities. . . .

The Judicial Officer, therefore, should:

(1) Vacate the entire Decision and Order of the

law judge (including the discussion, findings and

conclusions therein); (2) Issue findings of fact that

petitioners are handlers, that the record contains

more evidence of germaneness than the earlier

case, and that the record contains no evidence of

political or ideological activities; and (3) Issue a

Decision and Order dismissing the petitions on

the merits.

37a

Appendix D

In the unlikely event some reviewing court

should determine more extensive factual findings

are necessary, the matter can be remanded to the

Judicial Officer with specific directions in accord

with 7 U.S.C. [§] 608c(15)(B).

Respondent’s Motion for Immediate Decision at 1-3.

On November 26, 1997, Mr. Brian Leighton, on behalf

of Petitioners in 94 AMA Docket No. F&V 981 -1,94 AMA

Docket No. F&V 981-3, 94 AMA Docket No. F&V 981-4,

and 94 AMA Docket No. F&V 981-7 filed Petitioners’

Response to “Respondent’s Motion to the Judicial Officer

to Vacate the Findings of Facts, Factual Discussion,

Conclusions of Law and Order of the ALJ and to Issue an

Immediate Decision” [hereinafter Petitioners’ Response to

Respondent’s Motion for Immediate Decision].'* Petitioners

contend that Respondent’s motion must be denied because

there is no authority in the Rules of Practice for Respondent’s

Motion for Immediate Decision, the Judicia] Officer already ©

has pending before him Respondent’s appeal, and Glickman

14. Mr. Leighton states that “Petitioners in Docket Nos.

F&V 981-3 (In Re Del Rio Nut Company, et al) and 981-5 (In Re

Treehouse Farms, Inc.) are joining in this Response, and these

responding Petitioners have no objection.” (Petitioners’ Response

to Respondent’s Motion for Immediate Decision at | n.1.) On

December 1, 1997, Del Rio Nut Company and Monte Vista Farming

Company filed a letter Stating that they “join in the response filed

by Mr. Brian Leighton” and Treehouse Farms, Inc., filed a letter

Stating that “Treehouse hereby joins the opposition of Cal-Almond

to Respondent’s motion to the judicial officer to vacate the findings

of fact, etc.”

38a

Appendix D

v. Wileman Bros. & Elliott, Inc., 117 S. Ct. 2130 (1997),

does not control the instant proceeding (Petitioners’

Response to Respondent’s Motion for Immediate Decision

at 1.) Petitioners further state that:

In what would make a mockery out of the

“exhaustion” requirement, the Respondent

advises the Judicial Officer that he must or should

simply ignore all of the-witnesses testimony, the

evidentiary record, the ALJ’s extensive findings

of fact, the ALJ’s factual discussion and just

simply rule that there is no First Amendment issue

_ — regardless of the facts. . . . That is simply not

a remedy [available] to the Respondent nor

reasoned decision-making.

Petitioners’ Response to Respondent’s Motion for Immediate

Decision at 8.

As an initial matter, section 900.59(a) of the Rules of

Practice (7 C.F.R. § 900.59(a)) does not limit motions that

may be filed and requires the Secretary to rule on all motions

filed after the record has been transmitted to the Secretary,

as follows:

§ 900.59 Motions and requests.

(a) General. (1) All motions and requests

shall be filed with the hearing clerk, except that

those made during the course of an oral hearing

may be filed with the judge or may be stated orally

and made a part of the transcript.

SPD AB Ss BENE is CO Lp ae tan bates

eee i Nis he ha iS Slat SSDS CANN Bae 5

39a

Appendix D

(2) The judge is authorized-to rule upon all

motions and requests filed or made prior to the

transmittal by the hearing clerk to the Secretary

of the record as provided in this subpart. The

Secretary shall rule upon all motions and requests

filed after that time.

7 C.F.R. § 900.59(a).

The Rules of Practice place no limit on motions that

may be filed in proceedings conducted in accordance with

the Rules of Practice, and section 900.59(a) of the Rules of

Practice (7 C.F.R. § 900.59(a)) requires the Secretary to rule

on all motions filed after the record has been transmitted to

the Secretary. As commonly used, the word a// does not

permit an exception or exclusion not specified.'* Moreover,

15. See Addison vy. Holly Hill Fruit Products, Inc., 322 U.S.

607, 610-11 (1944) (stating that a// means all, not substantiaily all);

William v. United States, 289 U.S. 553, 572 (1933) (describing the

word all as a comprehensive word); McLean v. United States, 226

U.S. 374, 383 (1912) (stating that a// excludes the idea of limitation);

National Steel & Shipbuilding Co. v. United States, 419 F.2d 863,

875 (Ct. Cl. 1969) (stating that a// means the whole of that which it

defines, not less than its entirety and that the purpose of the word

all is to underscore that intended breadth is not to be narrowed);

Texaco, Inc. v. Pigott, 235 F. Supp. 458, 464 (S.D. Miss. 1964)

(stating that all means the whole, the sum of all the parts, the

aggregate and that all is about the most comprehensive and all

inclusive word in the English language), aff'd per curiam, 358 F.2d

723 (Sth Cir. 1966); Travelers Ins. Co. v. Cimarron Ins. Co., 196

F. Supp. 681, 684 (D. Or. 1961) (stating that the word a// when

referring to the amount, quantity, extent, duration, quality, or degree

(Cont'd)

40a

Appendix D

(Cont’d)

means the whole of and that a statute which says all excludes

nothing); Fischer & Porter Co. v. Brooks Rotameter Co., 86 F. Supp.

502, 503 (E.D. Pa. 1949) (stating that the word any implies totality

as plainly as does the word ali and the only difference is that any

arrives at totality by a series of choices for consideration, whereas

all arrives at totality in a single leap); Jn re Central of Georgia Ry.,

58 F. Supp. 807, 813 (S.D. Ga. 1945) (stating that a more

comprehensive and all-inclusive word than all can hardly be found

in the English language, there is a totality about the word all that

few words possess), rev'd on other grounds and remanded sub nom.

Liberty National Bank & Trust Co. v. Bankers Trust, 150 F.2d 453

(Sth Cir. 1945); United States v. Bachman, 246 F. 1009, 1011 (E.D.

Pa. 1917) (stating that the word intended to embrace every member

of a class, where the number of the members of the class exceeds

two, is the word all); Beckwith v. Chicago, M. & St. P. Ry., 223

F. 858, 860 (W.D. Wash. 1915) (stating that the word all is very

comprehensive in its meaning); The Koenigin Luise, 184 F. 170,

173 (D.N.J. 1910) (describing the word ail as an inclusive term);

In re Lindsay Foods, Inc., 56 Agric. Dec. __, slip op. 12-13 (Aug.

28, 1997) (Remand Order) (stating that, as commonly used, the word

all does not permit an exception or exclusion not specified, and that

there is no basis for reading the word ail as used in 7 C.F.R.

§ 1.143(b)(2) narrowly); Jn re Far West Meats, 55 Agric. Dec. 1045,

1050 (1996) (Clarification of Ruling on Certified Questions) (stating

that, as commonly used, the word all does not permit an exception

or exclusion not specified, and that there is no basis for reading the

word all as used in 7 C.F.R. § 1.143(a) narrowly); Jn re Far West

Meats, 55 Agric. Dec. 1033, 1037 (1996) (Ruling on Certified

Questions) (stating that, as commonly used, the word all does not

permit an exception or exclusion not specified, and that there is no

basis for reading the word all as used in 7 C.F.R. § 1.143(a)

narrowly); Jn re Weissglass Gold Seal Dairy Corp., 32 Agric. Dec.

1004, 1041 (1973) (stating that: the word al] means as much as

possible, every individual component, every, and any whatever; the

(Cont'd)

i aaa

AD Susthati —

4la

Appendix D

the context in which the word all is used in section 900.59(a)

of the Rules of Practice (7 C.F.R. § 900.59(a)) provides no

basis for reading the word al/ narrowly. Since there is no

explicit limitation in the Rules of Practice on the nature of

motions that may be filed, and the Secretary must rule on a//

: motions filed after the transmittal of the record to the

Secretary, I disagree with Petitioners’ contention that there

is no authority in the Rules of Practice for Respondent’s

Motion for Immediate Decision, and Respondent’s previous

filing of an appeal does not affect Respondent’s ri ght to file

a motion in accordance with section 900.59(a) of the Rules

of Practice (7 C.F.R. § 900.59(a)). However, | agree with

Petitioners’ general contention that I must review the record

prior to issuing a Decision and Order. The Administrative

Procedure Act provides that an order may not be issued

€xcept on consideration of the whole record or those parts

of the record cited by a party, as follows:

§ 556. Hearings; presiding employees; powers

and duties; burden of proof; evidence;

record as basis of decision

(d) ... A sanction may not be imposed or

rule or order issued except on consideration of

the whole record or those parts thereof cited by a

SIRI a. 0 PNG nes

(Cont’d)

word all signifies the whole of; a more comprehensive word than

all cannot be found in the English language; a more comprehensive

and all-inclusive word than all can hardly be found in the English

language), aff'd, 369 F. Supp. 632 (S.D.N.Y. 1973).

42a

Appendix D

party and supported by and in accordance with

the reliable, probative, and substantial evidence.

5 U.S.C. § 556(d).

I reject Respondent’s suggestion (Respondent’s Motion

for Immediate Decision at 3-4) that a Decision and Order

could be issued in this proceeding without consideration of

at least those portions of the record cited by the parties.

Therefore, based solely on my view that I must review the

record prior to issuing an order in this proceeding,

Respondent’s Motion for Immediate Decision is denied.

After reviewing the record in this proceeding, I find that

Glickman v. Wileman Bros. & Elliott, Inc., 117 S. Ct. 2130

(1997), is dispositive of the First Amendment issue in this

proceeding, and the appellate filings reveal that the First

Amendment issue, Petitioners’ request for a refund of

assessments, and Respondent’s motion to exclude “the entire

testimony of petitioner Monte Cristo” are the only remaining

issues in this proceeding. Further, I find that much of the

evidence; much of Petitioners’, Respondents’, and

Intervenors’ filings; and much of the Chief ALJ’s Initial

Decision and Order have been rendered irrelevant by

Glickman v. Wileman Bros. & Elliott, Inc., 117 S. Ct. 2130

(1997).

Based on my finding that Glickman v. Wileman Bros.

& Elliott, Inc., 117 S. Ct. 2130 (1997), has rendered much

of the Chief ALJ’s Initial Decision and Order irrelevant; my

disagreement with the Chief ALJ’s conclusion that

Respondent has the burden of proof in this proceeding

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MASA A ied Wai i TRE ied tie Sages uth

43a

Appendix D

instituted under section 8c(15)(A) of the AMAA (7 U.S.C.

§ 608c(15)(A)): my disagreement with the Chief ALJ’s

conclusion that the Almond Board’s advertising and

promotional program for crop years 1986-87 through

1994-95 violates the First Amendment of the Constitution

of the United States; and my finding that Wileman Bros. is

dispositive of the First Amendment issue in this proceeding,

I have not adopted the Chief ALJ’s Initial Decision and Order

as the final Decision and Order.

Petitioner Amaretto Orchards’ exhibits are designated

by the letters “AO”: Petitioner Bal Nut, Inc.’s exhibits are

designated by the letters “BN”; Petitioner Beard’s Quality

Nut Company’s exhibits are designated by the letters “BON”;

Petitioner Cal-Almond, Inc.’s exhibits are designated by the

letters “CA”; Petitioner Central Valley Grower Packing’s

exhibits are designated by the letters “CVG”: Petitioner Del

Rio Nut Company’s exhibits are designated by the letters

“DRN”; Petitioner Frazier Nut Farms, Inc.’s exhibits are

designated by the letters “FN”; Petitioner Gold Hills Nut

Company, Inc.’s exhibits are designated by the letters “GH”;

Petitioner Hocker Nut Farm’s exhibits are designated by the

letters “HNF”; Petitioner Jardine Organic Ranch’s exhibits

are designated by the letters “JOR”; Petitioner Monte Cristo

Packing Company’s exhibits are designated by the letters

“MC”; Petitioner Monte Vista Farming Company’s exhibits

are designated by the letters “DRN”; Petitioner Rotteveel

Orchards’ exhibits are designated by the letters -_——

Petitioner Treehouse Farms, Inc.’s exhibits are designated

by the letters “TREE”; Petitioners’ joint exhibits are

designated by the letters “PJ”; Respondent’s exhibits are

designated by the letters “RX”; and transcript references are

designated by “Tr.”

44a

Appendix D

PERTINENT CONSTITUTIONAL, STATUTORY,

AND REGULATORY PROVISIONS

The pertinent provision of the Constitution of the United

States provides, as follows:

United States Constitution:

Amendment I

Congress shall make no law . . . abridging the

freedom of speech.

U.S. Const. amend. I.

The pertinent provisions of the AMAA provide, as

follows:

7USC.:

TITLE 7 — AGRICULTURE

CHAPTER 26 — AGRICULTURAL ADJUSTMENT

SUBCHAPTER III —

COMMODITY BENEFITS

ROE Et aE ont

‘

See RY ADL ERs PRAIRIE Bivey ata lieaaly Nb BS PAD ett wlh AR ahs ORI

. PASSER aN Pa A aE NRE rae aert Sha

4Sa

Appendix D

§ 608c. Orders regulating handling of

commodity

(6) Other commodities; terms and conditions

of orders

In the case of the agricultural commodities

and the products thereof, other than milk and its

products, specified in subsection (2) of this

section orders issued pursuant to this section shall

contain one or more of the following terms and

conditions, and (except as provided in subsection

(7) of this section), no others:

(1) Establishing or Providing for the

establishment of production research, marketing

research and development Projects designed to

assist, improve, or Promote the marketing,

distribution, and consumption or efficient

production of any such commodity or product, the

expense of such projects to be paid from funds

collected pursuant to the marketing order:

Provided, That with respect to orders applicable

to almonds... such projects may provide for any

form of marketing promotion including paid

advertising and with respect to almonds . . . may

provide for crediting the pro rata expense

assessment obligations of a handler with all or

46a

Appendix D

any portion of his direct expenditures for such

marketing promotion including paid advertising

‘as may be authorized by the order and when the

handling of any commodity for canning or

freezing is regulated, then any such projects may

also deal with the commodity or its products in

canned or frozen form: Provided further, That

the inclusion in a Federal marketing order of

provisions for research and marketing promotion,

including paid advertising, shall not be deemed

to preclude, preempt or supersede any such

provisions in any State program covering the same

commodity.

(15) Petition by handler for modification of

order or exemption; court review of

ruling of Secretary

(A) Any handler subject to an order may file

a written petition with the Secretary of

Agriculture, stating that any such order or any

provision of any such order or any obligation

imposed in connection therewith is not in

accordance with law and praying for a

modification thereof or to be exempted therefrom.

He shall thereupon be given an opportunity for a

hearing upon such petition, in accordance with

regulations made by the Secretary of Agriculture,

with the approval of the President. After such

hearing, the Secretary shall make a ruling upon

47a

Appendix D

the prayer of such petition which shall be final, if

in accordance with law.

7U.S.C. § 608c(6)(1), (15)(A).

The pertinent provisions of the Federal Agriculture

Improvement and Reform Act of 1996 provide, as follows:

110 Stat.:

TITLE V — AGRICULTURAL

PROMOTION

Subtitle A — Commodity Promotion

and Evaluation

Sec. 501. COMMODITY PROMOTION AND

EVALUATION.

(a) Commopity Promotion Law DerFinep. —

In this section, the term “commodity promotion

law” means a Federal law that provides for the

establishment and Operation of a promotion

program regarding an agricultural commodity that

includes a combination of promotion, research,

industry information, or consumer information

activities, is funded by mandatory assessments on

producers or Processors, and is designed to

maintain or expand markets and uses for the

commodity (as determined by the Secretary). The

term includes —

48a

Appendix D

(1) the marketing promotion

provisions under section 8c(6)(I) of the

Agricultural Adjustment Act (7 U.S.C.

608c(6)(1), reenacted with amendments

by the Agriculturai Marketing Agreement

Act of 1937{[.]

(b) Finpincs. — Congress finds the following:

(1) It is in the national public interest and

vital to the welfare of the agricultural economy

of the United States to maintain and expand

existing markets and develop new markets and

uses for agricultural commodities through

industry-funded, Government-supervised, generic

commedity promotion programs established

under commodity promotion laws.

(2) These generic commodity promotion

programs, funded by the agricultural producers

or processors who most directly reap the benefits

of the programs and supervised by the Secretary

of Agriculture, provide a unique opportunity for

producers and processors to inform consumers

about their products.

(3) The central congressional purpose

underlying each commodity promotion law has

always been to maintain and expand markets for

the agricultural commodity covered by the law,

ee ee |

I at A a Ne al

49a

Appendix D

rather than to maintain or expand the share of

those markets held by any individual producer or

processor.

(4) The commodity promotion laws were

neither designed nor intended to prohibit or

restrict, and the promotion programs established

and funded pursuant to these laws do not prohibit

or restrict, individual advertising or promotion of

the covered commodities by any producer,

processor, or group of producers or processors.

(5) It has never been the intent of Congress

for the generic commodity promotion programs

established and funded by the commodity

promotion laws to replace the individual

advertising and promotion efforts of producers or

processors.

(6) An individual producer’s or processor’s

own advertising initiatives are typically designed

to increase the share of the market held by that

producer or processor rather than to increase or

expand the overall size of the market.

(7) In contrast, a generic commodity

promotion program is intended and designed to

maintain or increase the overall demand for the

agricultural commodity covered by the program

and increase the size of the market for that

commodity, often by utilizing promotion methods

and techniques that individual producers and

50a

Appendix D

processors typically are unable, or have no

incentive, to employ.

(8) The commodity promotion laws establish

promotion programs that operate as “self-help”

mechanisms for producers and processors to fund

generic promotions for covered commodities

which, under the required supervision and

oversight of the Secretary of Agriculture —

(A) further specific national

governmental goals, as established by

Congress; and

(B) produce nonideological and

commercial communication the purpose

of which is to further the governmental

policy and objective of maintaining and

expanding the markets for the covered

commodities.

(9) While some commodity promotion laws

- grant a producer or processor the option of

crediting individual advertising conducted by the

producer or processor for all or a portion of the

producer’s or processor’s marketing promotion

assessments, all promotion programs established

under the commodity promotion laws, both those

programs that permit credit for individual

advertising and those programs that do not contain

such provisions, are very narrowly tailored to

fulfill the congressional purposes of the

;

Bad

Sla

Appendix D

commodity promotion laws without impairing or

infringing the legal or constitutional rights of any

individual producer or processor.

Federal Agriculture Improvement and Reform Act of 1996,

Pub. L. No. 104-127, § 501(a)(1), (b)(1)-(9), 110 Stat. 888,

1029-31 (1996).

The pertinent provisions of the Rules of Practice provide,

as follows:

7 CFR:

TITLE 7 — AGRICULTURE

SUBTITLE B — REGULATIONS OF THE

DEPARTMENT OF AGRICULTURE

CHAPTER IX — AGRICULTURAL

MARKETING SERVICE

PART 900 — GENERAL REGULATIONS

SUBPART — RULES OF PRACTICE GOVERNING

PROCEEDINGS ON PETITIONS TO MObpIFY OR

To Bre EXxemptTep From MARKETING ORDERS

52a

Appendix D

§ 900.51 Definitions.

As used in this subpart, the terms as defined

in the act shall apply with equal force and effect.

In addition, unless the context otherwise requires:

(1) The term handler means any person who,

by the terms of a marketing order, is subject

thereto, or to whom a marketing order is sought

to be made applicable[.]

§ 900.52 Institution of proceeding.

(a) Filing and service of petition. Any

handler desiring to complain that any marketing

order or any provision of any such order or any

obligation imposed in connection therewith is not

in accordance with law, shall file with the hearing

clerk, in quadruplicate, a petition in writing

addressed to the Secretary.

7 C.F.R. §§ 900.51(i), .52(a). |

The pertinent provisions of the Almond Order (1994)

provide, as follows:

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S$3a

Appendix D

7CFPS.:

TITLE 7 — AGRICULTURE

SUBTITLE B — REGULATIONS OF THE

DEPARTMENT OF AGRICULTURE

CHAPTER IX — AGRICULTURAL

MARKETING SERVICE

PART 981 — ALMONDS GROWN

IN CALIFORNIA

SUBPART — ORDER REGULATING HANDLING

DEFINITIONS

§ 981.4 Almonds.

Almonds means (unless otherwise specified)

all varieties of almonds (except bitter almonds),

either shelled or unshelled, grown in the State of

California, and for the Purposes of research

includes almond shells and hulls.

54a

- Appendix D

§ 981.12 Grower.

Grower is synonymous with producer and

means any person engaging, in a proprietary

Capacity, in the commercial production of

almonds.

§ 981.13 Handler.

Handler means any person handling almonds

during any crop year, except that such term shall

not include either a grower who sells only

almonds of his own production at retail at a

roadside stand operated by him, or a person

receiving almonds from growers and other

persons delivering these almonds to a handler.

§ 981.19 Crop year.

Crop year means the 12 months from July 1

to the following June 30 inclusive.

§ 981.22 Board.

Board means the Almond Board of California

which is the administrative agency established by

this subpart.

55a

Appendix D

ALMOND Boarp oF CALIFORNIA

§ 981.38 Powers.

The Board shall have the following powers:

(a) To administer the provisions of this part

in accordance with its terms;

(b) To make rules and regulations to effectuate

the terms and provisions of this part;

Secretary complaints of violations of this part; and

(d) To recommend to the Secretary

amendments to this part.

RESEARCH

§ 981.41 Research and development.

(a) General. The Board, with the approval

of the Secretary, may establish or provide for the

establishment of projects involving production

research, marketing research and development

projects, and marketing promotion including paid

advertising, designed to assist, improve, or

promote the marketing, distribution, consumption

or efficient production of almonds. The Board

56a

Appendix D

may also provide for crediting the pro rata expense

assessment obligations of a handler with such

portion of his direct expenditure for such

marketing promotion including paid advertising

as may be authorized. The expenses of such

projects shall be paid from funds collected

pursuant to § 981.81(a) or credited pursuant to

paragraph (c) of this section.

(b) Authorization. If, on the basis of a

Control Board recommendation pursuant to

§ 981.40(e) with respect to projects pursuant to

this section, and appertaining rules and

regulations established by the Secretary on

recommendation of the Board, and other available

information, the Secretary concurs that such

activities should be permitted, he shall authorize

such activities.

with the approval of the Secretary, may provide

for crediting all or any portion of a handler’s direct

expenditures for marketing promotion including

paid advertising, that promotes the sale of

almonds, almond products or their uses. No

handler shall receive credit for any allowable

direct expenditures that would exceed the total

of his assessment obligation which is attributable

to that portion of his assessment designated for

marketing promotion including paid advertising.

Such expenditures may include, but are not

limited to, money spent for advertising space or

cartaccienilieeeeietiaeiie

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57a

Appendix D

time in newspaper, magazines, radio, television,

transit, and outdoor media, including the actual

standard agency commission costs not to exceed

15 percent: Provided, That, with respect to paid

advertising, advertising production costs,

preparation expenses, travel allowances, and other

expenses not directly connected with paid space

or time, and costs relating to pre-testing of

advertising, test marketing, directory advertising,

point of sales materials, premiums, and trade

promotion allowances shall not be eligible for

credit against a handler’s assessment obligation.

(d) Promotion guidelines. Al] marketing

promotion activity engaged in by the Board,

including paid advertising, shall be subject to the

following terms and conditions:

(1) No marketing promotion, including paid

advertising shall refer to any private brand, private

trademark or private trade name;

(2) No promotion or advertising shall

disparage the quality, use, value, or sale of like

or any other agricultural commodity or product,

and no false or unwarranted claims shal] be made

in connection with the product;

(3) No promotion or advertising shall be

undertaken without reason to believe that returns

to producers will be improved by such activity;

and

58a

Appendix D

(4) Upon conclusion of each activity, but at

least annually, the Board shall summarize and

report the results of such activity to its members

and to the Secretary.

(e) Rules and regulations. Before any

project involving marketing promotion, including

paid advertising and the crediting of the pro rata

expense assessment obligation of handlers is

undertaken pursuant to this section, the Secretary,

after recommendation by the Board, shall

prescribe appropriate rules and regulations as are

necessary to effectively regulate such activity.

SUBPART — ADMINISTRATIVE RULES

AND REGULATIONS

§ 981.441 Credit for market promotion activities,

including paid advertisiag.

(a) In order for a handler to receive credit

for his/her own promotional activities from his/

her pro rata portion of advertising assessment

payments, pursuant to § 981.41(c), the Board must

determine that such expenditures meet the

applicable requirements of this section. Credit will

be granted in the form of a payment from the

Board, hereinafter termed “Credit-Back.” Credit-

Back will be granted in an amount not to exceed

50 percent of a handler’s proven expenditures for

qualified activities.

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59a

Appendix D

(b) The portion of the handler assessment for

which credit may be received under this section

will be billed, and is due and payable, at the same

time as the portion of the handler assessment used

for the Board’s administrative expenses.

qualifying activities only to the handler who

performed such activities and who filed a claim

for Credit-Back in accordance with this section.

(d) Credit-Back shall be granted only for

qualified promotional activities which are

conducted and completed during the crop year for

which Credit-Back is requested.

(€) The following requirements shall apply

to Credit-Back for all promotional activities:

(1) Credit-Back granted by the Board shall

be that which is appropriate when compared to

accepted professional practices and rates for the

type of activity conducted. In the case of claims

for Credit-Back activities not covered by specific

and established criteria, the Board shall grant the

claim if it is consistent with practices and rates

for similar activities. To this end, the Board may

issue guidelines for qualifying activities from time

to time as warranted. For activities in markets

other than the United States and Canada,

paragraph (e)(5) of this section shall also apply.

60a

Appendix D

(2) The clear and evident purpose of each

activity shall be to promote the sale, consumption

or use of California almonds, and nothing therein

shall detract from this purpose.

(3) No Credit-Back will be given for

advertising placed in publications that target the

farming or grower trade. No Credit-Back shall be

given for any outdoor advertising or sponsorships

in the California almond growing counties of

Butte, Colusa, Fresno, Glenn, Kern, Madera,

Merced, Sacramento, San Joaquin, Stanislaus and

Tulare counties, except that, outdoor advertising

in these counties which specifically directs

consumers to a handler-operated outlet offering

direct purchase of almonds will be eligible. for

Credit-Back.

(4) Credit-Back shall be granted for those

qualified activities specified below, except that

Credit-Back for travel expenses will not be

allowed in any case.

(1) Paid advertising directed to end users,

trade or industrial users: Credit-Back shall be

granted for money spent on paid advertising space

or time including, but not limited to, newspapers,

magazines, radio, television, transit and outdoor

media, and including the standard agency

commission costs not to exceed 15 percent of

gross.

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6la

Appendix D

(i1) Other market Promotion activities.

Credit-Back shall be granted for market

Promotion other than paid advertising, for the

following activities:

(A) Marketing research (except pre-testing

and test-marketing of paid advertising);

(B) Trade and consumer product publicity;

(D) Direct mail printing and distribution:

(E) Retail in-store demonstrations;

(F) Point-of-sale materials (not including

packaging);

(G) Sales and marketing presentation kits;

(H) Trade fairs and exhibits;

(1) Trade seminars;

(J) 50/50 advertising with retailers;

(K) Couponing (printing, distribution and

handling costs only);

(L) Purchase of Board produced promotional

materials; and

(M) Sponsorships.

62a

Appendix D

(iii) For any qualified activity involving joint

participation by a handler and a manufacturer or

seller of acomplementary product(s), or a handler

selling multiple complementary products,

including other nuts, with such activity including

the handler’s name or brand, or the words

“California Almonds”, the amount allowed for

Credit-Back claim shall reflect that portion of the

activity represented by almonds, or the handler’s

actual payment, whichever is less.

(iv) When products containing almonds are

promoted, the amount allowed for Credit-Back

claim shall reflect that portion of the product

weight represented by almonds, or the handler’s

actual payment, whichever is less. In addition, the

product must display the handler’s name or brand,

or the words “California Almonds” on the

primary, face label.

(5) Credit-Back for promotional activities in

a foreign market shall be granted at 50 percent of

a handler’s unreimbursed expenditures for

qualified activities in any foreign market, if the

handler is promoting pursuant to a contract with

the Foreign Agricultural Service, USDA (FAS)

and/or the Californra Department of Food and

Agriculture (CDFA). Such activities must also

meet the requirements of paragraphs (e)(1), (2),

(3), (4) and (6) of this section. Unless the Board

is administering the foreign marketing program,

such activities shall not be eligible for

63a

Appendix D

Credit-Back unless the handler certifies that

he/she was not and will not be reimbursed by

either FAS or the CDFA for the amount claimed

for Credit-Back, and has on record with the Board

all claims for reimbursement made to FAS

and/or the CDFA. Foreign market expenses paid

by third parties as part of a handler’s contract with

FAS or CDFA will not be eligible for

Credit-Back.

(6) A handler must file Claims with the

Board to obtain Credit-Back for promotional

expenditures, as follows:

(1) Within 15 days after start of the applicable

crop year, a handler must declare to the Board

his/her intention to apply for Credit-Back funds,

and for what amount of his/her assessment funds

he/she intends to seek Credit-Back: Provided,

That, with respect to the 1993-94 crop year,

handlers must declare their intent no later than

October 15, 1993. If a handler’s intent is not

declared on or before that time, there will be no

further consideration of Credit-Back claims from

that handler for that entire crop year.

(ii) Ifa handler has declared his/her intention

to apply for Credit-Back funds, but does not

submit any approved activity claims by January

15 of the crop year, he/she wil] be ineligible to

apply for any Credit-Back funds for that entire

crop year.

64a

Appendix D

(iii) After a handler has declared to the Board

his/her intention to apply for Credit-Back funds,

he/she must get pre-approval from the Board in

writing for each activity he/she plans to conduct.

Once pre-approval is received, the handler can

then conduct the activity and, upon completion,

submit a claim to the Board.

(iv) All claims submitted to the Board for any

qualified activity must include:

(A) Reference to the pre-approval number for

the activity assigned by the Board;

(B) A description of the activity and when

and where it was conducted;

agencies;

(D) Copies of all canceled checks issued by

the handler in payment of these invoices; and

(E) An actual sample, picture or other

physical evidence of the activity.

(v) Checks from the Board in payment of

approved Credit-Back claims will be mailed to

handlers on February 15, April 15, June 15, and

30 days after submission of final claims for the

crop year pursuant to paragraph (c)(6)(vi) of this

section. To receive payment on these dates,

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65a

Appendix D

handler claims must be submitted, with all

required elements, at least one month prior to the

payment date. A handler can receive Credit-Back

for his/her allowable direct expenditures only up

to the amount of that portion of the handler’s

assessment designated for marketing promotion,

including paid advertising.

(vi) A statement of the Credit-Back

commitments outstanding as of the close of a crop

year must be submitted in full to the Board within

15 days after close of that crop year. Final claims

must be submitted within 105 days after the close

of that crop year.

(f) Appeals. If a determination is made by

the Board staff that a particular promotional

activity is not eli gible for Credit-Back because it

does not meet the criteria specified herein, or for

any other reason, the affected handler may request

the Public Relations and Advertising Committee

to review the Board staff’s decision. If the affected

handler disagrees with the decision of the Public

Relations and Advertising Committee, the handler

may request that the Board review the Committee

decision. If the handler disagrees with the decision

of the Board, the handler, through the Board, may

request that the Secretary review the Board’s

decision. The Secretary maintains the ri ght to

review any decisions made by the aforementioned

bodies at his/her discretion.

7 C.F.R. §§ 981.4, 12, .13, .19, .22, 38, .41, .44] (1994).

66a

Appendix D

The pertinent provision of the Almond Order (1993)

provides, as follows:

hae SS

TITLE 7 — AGRICULTURE

SuBTITLE B — REGULATIONS OF THE

DEPARTMENT OF AGRICULTURE

CHAPTER IX — AGRICULTURAL

MARKETING SERVICE

PART 981 — ALMONDS GROWN

IN CALIFORNIA

SUBPART — ADMINISTRATIVE RULES

AND REGULATIONS

67a

Appendix D

§ 981.441 Crediting for marketing promotion

including paid advertising.

(a) In order for a handler to receive credit

tor his marketing promotion expenditures,

including paid advertising, against his pro rata

expense assessment obligation pursuant to

§ 981.41(c), the Board shall determine that such

expenditures meet the applicable requirements of

this section.

(b) Each paid advertisement must be

published, broadcast, or displayed and other

marketing promotion activities must be conducted

during the crop year for which credit is requested,

except that a handler may receive credit up toa

maximum of 40 percent of his total creditable

advertising and promotion obligation as of the

June 30 redetermination report for expenditures

made for advertisements published, broadcast, or

displayed and other marketing promotion

activities conducted no later than December 31

of the subsequent crop year. A handler utilizing

this extension shall: (1) File any required

documentation with the Board no later than the

following January 31, and (2) certify to the Board.

at the time of the June 30 redetermination, his

planned expenditures during the extension period.

to crediting for paid advertising:

68a

Appendix D

(1) Credit granted by the Board for paid

advertising shall be that which is appropriate

when compared to the applicable outlet rate

published in the domestic or Canadian catalogs

of Standard Rate and Data Service or station,

publisher, or outdoor rate cards. In the case of

claims for credit not covered by any such source,

the Board shall grant the claim if it is consistent

with rates for comparable outlets. For advertisements

in markets other than the United States and

Canada, paragraph (c)(4) of this section shall

apply.

(2) The clear and evident purpose of each

advertisement shall be to promote the sale,

consumption, or use of California almonds, and

nothing therein shall detract from this purpose.

(3) Credit for paid advertising shall be

granted:

(i) For 100 percent of a handler’s payment

to an advertising medium:

(A) Fora generic advertisement of California

almonds;

(B) For an advertisement of the handler’s

brand of almonds;

includes reference to a complementary commodity

or product;

69a

Appendix D

_ (D) For a trade media advertisement that

displays branded food products containing

almonds, or announces a handler’s future

promotion activities, including joint promotions,

and the entire expenditure is borne by the handler;

(E) For in-store Supermarket advertisements

using fixed position, video media, or light

emitting diode (LED) signs, when such payments

are made through an advertising firm or company

which specializes in the production of LED

advertisements and the placement of those

advertisements: (/) Fixed position advertisements

must include one-or more of the following: (i)

Processed color displays enclosed in Plastic

frames and mounted on supermarket shopping

Carts; (17) overhead directories enclosed in frames

placed at the end or middle of supermarket aisles;

Or (117) processed color advertisements enclosed

in frames and mounted on a supermarket shelf;

(2) Video advertisements must be shown on a

fixed video monitor running television

commercials or infomercials for specific products

on a rotating basis; (3) LED advertisements must

be shown on an in-aisle LED screen running

specific product Messages on a rotating basis: or

(F) For processed color displays enclosed in

frames mounted on fixtures outside and in front

of retail food stores when payments are made

through an advertising firm.

70a

Appendix D

(11) For an advertisement resulting from joint

participation by a handler and a manufacturer or

seller of acomplementary commodity or product,

and including the brands of both, the credit shall

be 50 percent of the total allowable payment to

the advertising medium, or the handler’s payment

thereof, whichever is less.

(111) For an advertisement resulting from joint

participation by a handler and manufacturers or

sellers of two complementary commodities or

products, and including the brands of all three,

the credit shall be one-third of the total allowable

payment to the advertising medium, or the

handler’s payment thereof, whichever is less.

(iv) When almond products, other than

almond butter, are advertised, the credit shall be

50 percent of the total allowable payment to the

advertising medium or 50 percent of the handler’s

payment thereof, whichever is less: Provided,

That (A) the almond product does not contain nuts

other than almonds, (B) the almond product

contains at least 50 percent raw shelled almonds

by weight, and (C) the almond product displays

the handler’s brand and: Provided further, That,

if the product is advertised with forms of almonds

for which 100 percent credit is allowed, the

advertisement shall receive 100 percent credit

provided it meets the criteria of paragraph

(c)(3)(iv)(A), (B), and (C) of this section. With

respect to almond butter advertising, the credit

*. NCU Den SS EY ates

Tla

Appendix D

Shall be 100 percent of the total allowable

payment to the advertising medium or 100 percent

of the handler’s payment thereof, whichever is

less. For the handler to receive credit, the almond

butter must meet the specifications contained in

§ 981.466, and the handler’s brand must be

displayed.

(4) Credit for media expenditures in a foreign

market shall be granted:

(1) For handlers’ unreimbursed media

expenditures for advertising in any forei gn market

pursuant to a contract with the Foreign

Agricultural Service, U.S. Department of

Agriculture, and/or the California Department of

Food and Agriculture, provided the advertisements

meet the requirements of paragraphs (c)(2) and

(3) of this section and the limitations of

paragraphs (c)(5)(i) and (11) of this section. Such

advertising in foreign markets shall not be

creditable unless the handler certifies on ABC

Form 31 that said handler was not and will not be

reimbursed for such advertising by the Foreign

Agricultural Service or the California Department

of Food and Agriculture and submits to the Board

copies of all claims for reimbursement filed with

the Foreign Agriculture Service and/or the

California Department of Food and Agriculture.

(ii) For a handler’s media expenditures for

brand advertising in any country where California

72a

Appendix D

almonds are sold, credit shall be allowed when

claims are substantiated by applicable rate cards.

The provisions of this section applicable to

domestic advertising shall also apply to the

crediting of advertising in these markets.

(5) Credit granted a handler shall be subject

to other conditions as follows:

(i) No credit shall be granted to a handler

when more than two complementary branded

products are included in an advertisement.

(ii) Advertisements which, in addition to

promoting California almonds, also mention or

promote the sale of noncomplementary

commodities or products, or of competing nuts,

shall not be eligible for credit.

(iii) Advertisements which direct consumers

to one or more named retail outlets, other than

handler operated, shall not be eligible for credit.

(6) A handler must file a claim with the

Board to obtain credit for an advertising

expenditure. Except as provided in paragraph (b)

of this section, no credit shall be granted unless a

preliminary claim is filed on or before July 15 of

the succeeding crop year and a final claim is filed

on or before October 15 of the succeeding crop

year. Each preliminary claim must be filed on an

ABC Form 31 (claim for advertising credit),

73a

Appendix D

stating that documentation will be submitted as

expeditiously as possible, but no later than

October 15. If this preliminary claim is not filed

on or before July 15, there will be no consideration

of the claim under any circumstances. Each final

claim must be submitted on ABC Form 31 and

accompanied by appropriate proof of performance

as follows:

(1) For published advertisements, submit a

copy of the publication invoice, agency invoice,

if any, and tear sheet of the advertisement.

(11) For radio advertisements, submit a copy

of the station invoice, a copy of the script, or

reference to a copy on file with the Board, and

the agency invoice, if any.

(iii) For television advertisements, submit a

copy of the station invoice, a copy of the script

and tape or story board of the advertisement, or a

reference to these in the Board files, and the

agency invoice, if any.

(iv) For outdoor advertisements, submit a

copy of the company invoice, a photograph of the

display or areference to a photograph in the Board

files, and the agency invoice, if any.

(v) For in-store supermarket advertising and

for mounted advertising enclosed in frames

outside and in front of retail food Stores, submit a

74a

Appendix D

copy of the company invoice, a copy of the actual

advertisement or video tape, a published rate card ©

from a nationally recognized company, and a copy

of the agency invoice, if any.

(vi) Each claim shall aiso include a

certification to the Secretary of Agriculture and

to the Board that the claim is just and conforms

to requirements set forth in § 981.41(c). The

Board shall advise the handler promptly of the

extent to which such claim has been allowed.

(d) The following requirements shall apply

to crediting for marketing promotion other than

paid advertising:

(1) Credit for marketing promotion

expenditures shall be granted:

(i) For the distribution of sample packages

containing one-half ounce or less of almonds to

charitable or educational outlets. For the purposes

of this section, the term charitable outlet means

an organization to which a charitable contribution

as defined in section 170(c) of the Internal

Revenue Code (26 U.S.C. 170(c)) may be made.

Such sample packages shall be packed for the

Board under its generic label and sold to the

distributing handlers at the price paid for them

by the Board. Credit shall be based on the price a

handler pays the Board for such packages and

upon receipt by the Board of acceptable proof of

a esaineerernemnniiieeiiil

75a

Appendix D

distribution. Such sample packages may or may

not be personalized with an individual handler’s

label. Credit applicable to the distribution of

sample packages shall be subject to the following

conditions:

(A) A handler may receive credit for 150

percent of the purchase price of such packages

against the creditable assessment obligation

incurred on the first 4,000,000 redetermined

kernel weight pounds received by him during a

crop year.

(B) A handler may receive credit for 100

percent of the purchase price of such packages

against the creditable assessment obligation

incurred on the second 4,000,000 redetermined

kernel weight pounds received by him during a

crop year.

the creditable assessment obligation incurred on

8,000,000 redetermined kernel weight pounds

received by a handler during a crop year.

(D) No credit shall be granted for sample

packages distributed to market segments where

almonds are already being sold. Handlers shall

obtain approval from the Board prior to

distribution to ensure that this condition is met.

76a

Appendix D

(E) No credit shall be applicable to the

distribution of sample packages in outlets where

they will be used for resale.

(F) Handlers must place written orders for

sample packages with the Board no later than

February | of any crop year except to the extent

- that handlers use the deferment provision found

in paragraph (b) of this section: Provided, That

for the 1988-89 crop year, handlers must place

written orders no later than March 15, 1989.

Handlers must place written orders for sample

packages with the Board no later than August 15

of any crop year to receive credit for up to

40 percent of their creditable assessment

obligations when using the deferment provision

pursuant to paragraph (b) of this section.

(G) Handlers must file claims with the Board

in order to receive credit for the distribution of

sample packages. Except as vrovided in paragraph

(b) of this section, no credit shall be granted unless

a preliminary claim is filed on or before July 15

of the succeeding crop year and a final claim is

filed on or before October 15 of the succeeding

crop year. Each preliminary claim must be filed

on an ABC Form 31 (claim for advertising credit),

stating that proof of distribution will be submitted

as expeditiously as possible, but no later than

October 15. If this preliminary claim is not filed

on or before July 15, there will be no consideration

of the claim under any circumstances. Each final

77a

Appendix D

claim must be submitted on ABC Form 31

and accompanied by appropriate proof of

performance. This proof shall consist of a si gned

Statement from the organization to which sample

packages were distributed, on that organization’s

letterhead, stating:

(1) The name and address of the handler from

whom the packages were received;

(2) The date of receipt;

(3) The volume of packages received:

(4) How such packages will be used; and

(5) A statement that such packages will not

be used for resale.

(11) For promotion materials available from

the Board and sold to handlers at the price paid

for them by the Board. Credit shall be granted for

the amount a handler pays the Board for such

materials upon purchase. Such materials may or

may not be personalized with the label of an

individual handler.

(111) For costs directly related to mail order

promotion subject to the following conditions:

(A) Credit shall only be granted for the

following expenditures:

78a

Appendix D

(1) For the purchase of mailing lists to

conduct mail order promotions.

(2) For the cost of envelopes and postage to

mail promotional materials.

(B) Credit for mail order promotion shall be

limited to a total of $25,000 or 25 percent ofa

handler’s creditable assessment per crop year,

whichever is greater.

in order to receive credit for mail order promotion

expenditures. Except as provided in paragraph (b)

of this section, no credit shall be granted unless a

preliminary claim is filed on or before July 15 of

the succeeding crop year and a final claim is filed

on or before October 15 of the succeeding crop

year. Each preliminary claim must be filed on an

ABC Form 31 (claim for advertising credit),

stating that proof of performance will be

submitted as expeditiously as possible, but no

later than October 15. If this preliminary claim is

not filed on or before July 15, there will be no

consideration of the claim under any circumstances.

Each final claim must be submitted on ABC Form

31 and accompanied by appropriate proofs of

performance such as invoices or postal receipts.

(e) Credit shall be granted for payments

made to the Board for use by the Board for generic

marketing promotion including paid advertising

subject to the following conditions:

79a

Appendix D

(1) A handler may receive credit for 150

percent of a payment made to the Board against

the creditable assessment obligation.

(2) When a handler elects to use this method

of crediting for all-or a portion of such handler’s

assessment obligation, the handler may use the

extension provided for pursuant to paragraph (b)

of this section for the handler’s deferred

advertising and promotion obligation.

(3) Handlers must file claims with the Board

on ABC Form 31 in order to receive credit for

payments made to the Board. No credit shall be

granted unless a claim is filed on or before January

31 of the then current crop year: Provided, That

for the 1988-89 crop year for claims not

previously filed on or before January 31, 1989, a

claim or supplementary claim must be filed with

the Board on ABC Form 31 on or before March

31, 1989. Payments must be made as follows:

One-fourth of total claim on or before January

31; one-fourth on or before March 31 ; one-fourth

on or before May 31; and one-fourth on or before

June 30 of the then current crop year: Provided,

That for the 1988-89 crop year, payments not

previously made on or before January 31, 1989,

must be made as follows: One-third on or before

March 31, 1989; one-third on or before May 31,

1989; and one-third on or before June 30, 1989.

If the entire amount of the claim is not paid by

June 30, or if a handler fails to meet any payment

80a

Appendix D

deadline of this paragraph, credit for payment

shall revert to the 100 percent basis.

7 C.F.R. § 981.441 (1993).

I. Findings of Fact

A. The Almond Order and Its Promotion Program

1. The AMAA authorizes the creation of marketing

orders to establish and maintain orderly marketing conditions

for agricultural commodities in interstate commerce. The

Secretary promulgated the Almond Order in 1950, pursuant

to the AMAA. (15 Fed. Reg. 4272; 15 Fed. Reg. 3623

(1950).)

2. Evidence indicated that if current almond production

levels continued, there would be a significant decrease in

the price of almonds and high levels of production were

predicted to continue. The Almond Order was promulgated

to stabilize the almond industry. The goal of the Almond

Order is to provide an adjustment of the supply of almonds

to the trade demand, and as a result, increase grower returns.

(15 Fed. Reg. 3623-24 (1950).)

3. The Almond Order contains provisions for

advertising and promotion by the Almond Board which

administers the Almond Order and the regulations which

implement the advertising and promotion program. (7 C.F.R.

§§ 981.41, .441 (1994).) The Almond Board gives credit

against “advertising assessments” to those handlers who

engage in specified forms of branded advertising and brand

8la

Appendix D

promotion. (7 C.F.R. §§ 981.41, .441] (1994).) The purpose

of both the Almond Board’s generic advertising and

promotion, which is paid for out of those “advertising

assessments” actually collected from handlers, and the

branded advertising and promotion, which the Almond Board

encourages, through the credits, is to achieve the Almond

Order’s asserted goal. (7 C.F.R. § 981.41 (1994).)

4. There are two distinct Almond Board advertising and

promotion programs referenced in this proceeding. The first

program, the “creditable advertising” program, was in effect

through and including the 1992-93 crop year and was

essentially a program of creditable industry advertising with

a small Almond Board generic advertising element. (7 C.F.R.

$§ 981.41, .441 (1993).) The second program, the

“credit-back” program, began with the 1993-94 crop year.

The “credit-back” program is a large generic advertising,

promotion, and public relations program operated by the

Almond Board, with various efforts in both the domestic

and export markets. These efforts included a television

commercial (Tr. 2081-83), a public relations program

(RX 255-256; Tr. 1205-06), an almond promotion program

for foreign markets (Tr. 369-71 » 2106-09, 2215-17), research

on new product development (RX 259; Tr. 1301-02,

1311-12), and consumer and industry research (RX 243;

Tr. 1313-23). The credit-back program allows handlers to

receive partial credit back for many more forms of branded

advertising and brand promotion than were allowed under

the creditable program. (7 C.F.R. §§ 981.41, .441 (1994).)

5. The Almond Board seeks through its generic

advertising and promotion activities to build demand through

82a

Appendix D

the changing of consumer preferences by providing

information to manufacturers and end users about the

essential features of almonds. (RX 248 at 2, RX 260 at 2.)

6. Increasing the demand for a product involves

influencing consumer attitudes so that more of a product can

be sold at the given price, the same amount can be sold at a

higher price, or more of the product can be sold at a higher

price. (RX 250 at 2-3, RX 251 at 2.) Expansion of demand

benefits producers as a group because their revenues increase.

(RX 248 at 12-13.)

7. The marketing mix available to firms and

organizations marketing products and services includes

advertising, promotion, publicity, and public relations.

(RX 249 at 2; Tr. 817-18.)

8. Advertising is defined as paid broadcasting of a

message in the television, radio, or print media. It can also

involve the providing of point-of-purchase materials to

retailers. Promotion involves the placing of information

oriented messages such as a product’s nutritional aspects or

suggestions for its preparation, in the various media.

9. Since advertising is an efficient way of reaching a

large number of people, organizations that market products

that are aimed directly to consumers spend considerable sums

on advertising. (RX 251 at 2.)

10. Generic advertising is the cooperative effort among

producers of a nearly homogenous product to disseminate

information about the underlying general attributes of the

83a

Appendix D

product to existing and potential customers for the purpose

of strengthening demand for the commodity. (RX 249 at 3-4,

RX 260 at 1, RX 264 at 1-3.)

11. Branded advertising is the effort of an individual

firm in the product category that emphasizes the particular

attributes of its brand as compared to competing bands.

(RX 260 at 1, RX 264 at 3.)

12. Brand and generic advertising can be complementary

when they have mutually reinforcing effects on consumer

choice. (RX 248 at 2, 4, RX 260 at 1.)

13. The Law of One Price, which states that, once cost

differentials are excluded, every firm in the marketing

channel receives the same price, applies to the almond

industry. (RX 251 at 7; Tr. 687-88.) Because the Law of One

Price applies in the almond industry, the benefits of an

effective advertising program accrue to everyone who sells

the commodity. (RX 251 at 7; Tr. 655, 664.)

14. The rationale for mandatory collection of advertising

and promotion assessments is that everyone who benefits

from advertising should share equitably in its cost and not

be a “free rider.” (RX 250 at 2, 6, RX 251 at 3-5, RX 254

at 2, RX 260 at 5; Tr. 983-84.) The mandatory collection of

funds to support programs to benefit industries composed

of many producers is essential for success of the program.

~ (RX 254 at 2.) Voluntary programs, even when supported

financially by an overwhelming majority of an industry, fail

because of “free riders” who are able to enjoy the same

benefits as those supporting the program. (RX 25] at 4,

RX 254 at 2; Tr. 983-84.)

84a

Appendix D

15. The phenomenon of tax shifting results in the

incidence of a tax being ultimately shared with other entities

in the marketing channel. (Tr. 690.) Tax shifting in a

cooperative advertising program results in the greatest

incidence of the cost of the program being borne by that

side of the market that has the least elastic supply response.

In the agriculture industry, producers have the least elastic

supply response. (RX 248 at 4; Tr. 331, 690-94, 1538,

2461-67.)

16. Allsix agricultural economists called by Respondent

as expert witnesses, Dr. Ronald Ward, Dr. Henry Kinnucan,

Dr. Richard Sexton, Dr. Jason Christian, Dr. Hoy Carman,

and Dr. Olan Forker, are experienced researchers on the

impact of advertising on commodities. (RX 248, 250, 251,

252, 254, 260; Tr. 618, 833, 921, 994, 1160, 1446.)

Dr. Russell Winer and Dr. Margaret Campbell, professors

of marketing, are experts in the area of advertising theory.

(RX 249, 264; Tr. 775, 1731.) The agricultural economist

called by Petitioners, Professor Michael K. Wohlgenant,

is also an experienced researcher. (PJ 2; Tr. 1787.) Professor

Scott Davis, who was called by Petitioners, is an expert in

the area of marketing and advertising theory as well as

economics. (PJ 1; Tr. 1983.)

17. The testimony of the agricultural economists called

by Respondent and the empirical results from their studies

on various agricultural commodities confirm that cooperative

generic advertising and promotion can be a viable tool for

building demand and ultimately increasing producer returns.

(RX 248, RX 250-251, RX 254, RX 260.)

85a

Appendix D

18. The Almond Board retained the firm of Hallberg,

Schierson & Company to determine the effectiveness of the

Almond Board’s generic advertising program. (Tr. 327.)

On January 28, 1991, Hallberg, Schireson & Company

submitted A Report of a Research Study of Domestic Almond

Sales and Customers, Advertising and Public Relations

Programs to Promote California Almonds to the Almond

Board. (RX 265.) The Hallberg, Schireson & Company report

States that the “programs appear correctly targeted and well

received”, but “there is Significant room for improvement

by better differentiating almonds from other nuts.” The

Hallberg, Schireson & Company report concludes that the

Almond Board should continue its public relations efforts

aimed at institutional purchasers and shift current consumer

public relations from a recipe-ingredient focus to

consumer-directed messages based on a strong “differentiating

positioning.” (RX 265: Tr. 2087-88, 2235.)

19. Dr. Christian concluded a study on September 19,

1994, entitled The Economic Effects of Advertising in the

California Almond Industry in which he found advertising

expenditures in the past have had a significant impact on the

demand for California almonds. Since creditable branded

advertising constituted almost all advertising and Blue

Diamond Growers, Inc., advertising constituted a large

majority of the branded advertising during this time,

Dr. Christian’s Study uses Blue Diamond advertising

expenditures to measure the effectiveness of branded almond

advertising. Dr. Christian found that for every dollar spent

on Blue Diamond Growers, Inc., advertising, growers

benefitted with $5 of increased returns. Advertising has

contributed to higher prices received for each year’s crop.

86a

Appendix D

Branded advertising has had a positive impact not just on

the demand for the branded product, but on the demand faced

by the industry as a whole and leads to higher prices for all

almonds. (RX 159 at 20-21.)

20. None of Dr. Christian’s studies measured the effect

of advertising after 1992, and the Almond Board’s current

advertising and promotional activity was not examined by

Dr. Christian. (Tr. 1004.)

21. Petitioners are not prohibited or restrained by the

AMAA, the Almond Order, or the Almond Board from

advertising or promoting their own brands of almonds or

communicating any other message to any audience.

22. The Almond Order provides that Petitioners may

advertise their own brand of almonds and receive a credit

against their assessments for their branded advertising.

Neither the credit-back program nor the creditable program

requires handlers to advertise, but rather, both programs give

the handler the option to advertise and receive credit for

promotional expenditures as provided in the Almond Order.

While both the credit-back and creditable programs limit the

type of promotion for which a handler may receive credit,

neither the credit-back program nor the creditable program

prohibits or restricts a handler from promoting or advertising

almonds in any other way or from communicating any other

message to any audience. (7 C.F.R. §§ 981 41, .441. (1993);

7 C.F.R. §§ 981.41, .441. (1994).)

23. The Almond Promotion Program does not include

political or ideological views. Petitioners are not compelled

87a

Appendix D

by the AMAA, the Almond Order, or the Almond Board to

endorse or finance any political or ideological views.

24. The Almond Board has not identified Petitioners in

any of its promotional events, and the Almond Board’s

promotion program does not comipel Petitioners to speak.

Petitioners are not compelled by the AMAA, the Almond

Order, or the Almond Board to engage in actual or symbolic

speech.

25. The record reveals that the generic advertising

conducted by the Almond Board in accordance with the

Almond Order and the branded advertising conducted in

accordance with the Almond Order are germane to the

purposes of the Almond Order.

B. The Petitioners

Amaretto Orchards

26. Amaretto Orchards is a handler, as defined in section

981.13 of the Almond Order (7 C.F.R. § 981.13 (1994)),

Subject to regulation under the Almond Order

(7 C.F.R. pt. 981).

27. Amaretto Orchards’ mailing address and principal

place of business is 2000 Oak Street, 1-B, Bakersfield,

California 93301. (Petition filed in 94 AMA Docket No.

F&V 981-7 | 1(C); Answer filed in 94 AMA Docket No.

F&V 981-7 4 3.)

88a

Appendix D

28. Amaretto Orchards is a California general

partnership which was formed in 1986. The partners in

Amaretto Orchards are Bruce L. Beretta, David Beretta,

Franco Beretta, Marco Beretta, Sandra Beretta, Norman

Gilfenbain, Stuart Gilfenbain, and George Gill. (Petition filed

in 94 AMA Docket No. F&V 981-7 4 1(C); Answer filed in

94 AMA Docket No. F&V 981-7 4 3.)

29. The Almond Order’s Promotion Plan requires

Amaretto Orchards to pay advertising assessments for the

generic advertising and promotion of almonds by the Almond

Board, which may be avoided by engaging in branded

advertising and promotion activities, as specified in the

Almond Order. Amaretto Orchards seeks to have the Almond

Order’s Promotion Plan and implementing regulations

declared unlawful as they applied to Amaretto Orchards for

the 1986-87 crop year and subsequent crop years. (Petition

filed in 94 AMA Docket No. F&V 981-7 4 27.)'°

30. Amaretto Orchards became a handler of almonds

during the 1986-87 crop year and handles between 1.1 million

16. Petitioners in the proceeding captioned 94 AMA Docket

No. F&V 981-7 requested refunds of assessments by the Almond

Board for advertising and promotion back to the 1980-81 crop year

(Petition filed in 94 AMA Docket No. F&V 981-7). However, in

their proposed conclusions, Petitioners in the proceeding captioned

94 AMA Docket No. F&V 981-7 only make claim for assessments

back to the 1986-87 crop year. (Petitioners’ Proposed Findings of

Fact and Conclusions of Law at 49-52.) Further, Petitioners in the

proceeding captioned 94 AMA Docket No. F&V 981-7 do not appeal

the Chief ALJ’s Conclusions of Law which only relate to crop years

1986-87 through 1994-95 (Initial Decision and Order at 69.)

89a

Appendix D

pounds of almonds and 1.8 million pounds of almonds each

crop year. Approximately 70 per centum of Amaretto

Orchards’ almonds are exported. Amaretto Orchards has no

retail brand, but sells brown almonds (almonds that are not

manufactured) for use as an ingredient in other products,

primarily cereals. (AO | J i; Tr. 1954-56.)

31. From 1986 through the 1992-93 crop year, when

the creditable advertising program was in effect, Amaretto

Orchards typically purchased %-ounce packages of snack

almonds from the Almond Board to give them to Charities

so that Amaretto Orchards could receive 150 per centum

credit for those purchases pursuant to the Almond Order.

(AO | ¥ 2.)

32. On a couple of occasions, Amaretto Orchards

advertised its almonds pursuant to the Almond Order.

However, Amaretto Orchards would not have engaged in this

advertising but for the Almond Board’s Promotion Program.

(AO 1 4 2.)

33. Amaretto Orchards believes that the best way to

promote its almonds is by engaging in direct one-on-one

salesmanship with buyers and customers: by bringing buyers

to its plant and entertaining the buyers while visiting its plant:

and by traveling to Italy to promote its almonds. (AO 143.)

34. If Amaretto Orchards could retain for its own use

the money it pays to the Almond Board for the advertising

program, Amaretto Orchards would use the money to

increase the quality control system at its facility in order to

expand the number of potential buyers of its product.

(AO 1 4 3.)

90a

Appendix D

Bal Nut, Inc.

35. Bal Nut, Inc., 1s a handler, as defined in section

981.13 of the Almond Order (7 C.F.R. § 981.13 (1994)),

subject to regulation under the Almond Order (7 C.F.R.

pt. 981).

36. Bal Nut, Inc.’s mailing address is 191 E. Center Hill

Road, Dallas, Pennsylvania 18612. (Petition filed in94 AMA

Docket No. F&V 981-4 4 1(A), Answer filed in 94 AMA

Docket No. F&V 981-44 1.)

37. Bal Nut, Inc.’s principal place of business is Valley

Home, California. (Petition filed in 94 AMA Docket No.

F&V 981-4 | 1(A); Answer filed in 94 AMA Docket No.

F&V 981-4 4 1.)

38. Bal Nut, Inc., isa corporation which was incorporated

in the Commonwealth of Pennsylvania on June 1, 1989. Mr.

Vito Balice is the president of Bal Nut, Inc., and Ms.

Domicella Balice is the secretary and treasurer of Bal Nut,

Inc. (Petition filed in 94 AMA Docket No. F&V 981-4

q 1(A); Answer filed in 94 AMA Docket No. F&V 981-4

41.)

39. The Almond Order's Promotion Plan requires Bal

Nut, Inc., to pay advertising assessments for the generic

advertising and promotion of almonds by the Almond Board,

which may be avoided by engaging in branded advertising

and promotion activities, as specified in the Almond Order.

Bal Nut, Inc., seeks to have the Almond Order’s Promotion

Plan and implementing regulations declared unlawful as they

91a

Appendix D

applied to Bal Nut, Inc. (Petition filed in 94 AMA Docket

No. F&V 981-4 ¥ 29.)

40. Bal Nut, Inc., handles approximately 150,000 to

300,000 pounds of almonds each year. Approximately

80 per centum of its almonds are exported. (BN | 4 1;

Tr. 263-67.)

41. Mr. Vito Balice believes that the best way to

promote Bal Nut, Inc.’s product is to travel to various

countries to meet buyers, engage in one-on-one sales efforts

with those buyers, and have follow-up phone calls with those

buyers. Bal Nut, Inc., engages in these activities in an effort

to assure buyers that Bal Nut, Inc., can supply the product

the buyers require. (BN | 4 1.)

42. Since 1989, Bal Nut, Inc.. has generally paid the

Almond Board the advertising assessments and not engaged

in creditable advertising or credit-back advertising. However,

on one occasion, Bal Nut, Inc., did advertise almond butter

on radio station WARD in Wilkes-Barre, Pennsylvania, but

the advertisement, which cost about $900 to air, only sold

one pound of almond butter. (BN | 41; Tr. 272.)

43. If Bal Nut, Inc., was not required to participate in

the Almond Board’s advertising program, Bal Nut, Inc.,

would use the money it would save to upgrade its equipment,

install a bathroom at its warehouse, and fix a leaking roof.

(BN | 4 2; Tr. 269.)

92a

Appendix D

Beard’s Quality Nut Company

44. Beard’s Quality Nut Company is a handler, as

defined in section 981.13 of the Almond Order (7 C.F.R.

§ 981.13 (1994)), subject to regulation under the Almond

Order (7 C.F.R. pt. 981).

45. Beard’s Quality Nut Company’s mailing address and

principal place of business is 17495 South Seidner, Escalon,

California 95320. (Petition filed in 94 AMA Docket No.

F&V 981-7 § 1(B); Answer filed in 94 AMA Docket No.

F&V 981-7 ¥ 2.)

46. Beard’s Quality Nut Company is a sole proprietorship

which was formed in 1969. Beard’s Quality Nut Company

is owned by Mr. Rodney Beard. (Petition filed in 94 AMA

Docket No. F&V 981-7 § 1(B); Answer filed in 94 AMA

Docket No. F&V 981-7 { 2.)

47. The Almond Order’s Promotion Plan requires

Beard’s Quality Nut Company to pay advertising assessments

for the generic advertising and promotion of almonds by the

Almond Board, which may be avoided by engaging in

branded advertising and promotion activities, as specified

in the Almond Order. Beard’s Quality Nut Company seeks

to have the Almond Order’s Promotion Plan and

implementing regulations declared unlawful as they applied

to Beard’s Quality Nut Company for the 1986-87 crop year

and subsequent crop years. (Petition filed in 94 AMA Docket

No. F&V 981-7 ¥ 27.)"”

17. See note 16.

93a

Appendix D

48. Mr. Steven Beard is the manager of the almond

division of Beard’s Quality Nut Company and was the

chairman of the public relations and advertising committee

for the Almond Board for the 2 years immediately preceding

the date on which Mr. Steven Beard executed his November

3, 1994, written declaration, BQN 12. The public relations

and advertising committee and the Almond Board consist of

growers and handlers both of whom vote on Almond Board

and public relation and advertising committee recommendations

with respect to Almond Board expenditures for advertising

and promotion. (BQN 12 4 1.)

49. From 1986 to the date of Mr. Steven Beard’s

November 3, 1994, written declaration, BQN 12, Beard’s

Quality Nut Company spent its creditable advertising

assessment dollars and its credit-back dollars to avoid paying

that money to the Almond Board. (BQN 12 4 2.)

50. Beard’s Quality Nut Company has no store shelf

almonds for snacks or baking. All of Beard’s Quality Nut

Company products are sold as whole brown almonds and

are used as ingredients in other products. Beard’s Quality

Nut Company’s almonds are marketed throughout the world,

approximately 70 per centum of which are exported and

30 per centum of which are sold in the domestic market.

(BQN 12 ¥ 2.)

51. Beard’s Quality Nut Company has spent an

enormous amount of time and money for which it cannot

receive credit either under the creditable advertising rules

or the credit-back rules. These expenditures include: (1) the

costs associated with personal contact with many customers

94a

Appendix D

and direct mailing to those customers; (2) the cost of

purchasing new facilities and equipment and improving

existing facilities and equipment, (3) the costs associated

with improving efficiency, and (4) the costs associated with

improving the quality of Beard’s Nut Company’s product.

(BQN 12 4 3.)

52. If Beard’s Quality Nut Company was not required

to participate in the Almond Board’s advertising program,

Beard’s Quality Nut Company would use the money it would

save for trade publication advertisements, personal contact

with buyers, promotional materials, quality line extensions

at Beard’s Quality Nut Company’s facility in order to

produce a product that would appeal even more to the

industrial users and customers, Beard’s Quality Nut

Company sponsored seminars, and more travel to meet

buyers. (BQN 12 4 5.)

53. Beard’s Quality Nut Company's credit-back

advertising assessment, creditable advertising assessments,

and administrative assessments for the 1989-90 crop year

through the 1993-94 crop year are set forth in BQN 7-10.

Cal-Almond Inc.

54. Cal-Almond, Inc., isa handler, as defined in section

981.13 of the Almond Order (7 C.F.R. § 981.13 (1994)),

subject to regulation under the Almond Order (7 C.F.R.

pt. 981).

55. Cal-Almond, Inc.'s mailing address and principal

place of business 1s 6049 Leedom Road, Hughson, California

95a

Appendix D

95326. (Petition filed in 94 AMA Docket No. F&V 981-1]

{| 1(A); Answer filed in 94 AMA Docket No. F&V 981-]

{ 1.)

56. Cal-Almond, Inc., is a corporation which was

incorporated in the State of California on April 3, 1979.

Mr. Cloid Francis Angle is the president of Cal-Almond.

Inc., and Mr. Tyler Angle is the secretary and treasurer of

Cal-Almond, Inc. (Petition filed in 94 AMA Docket No.

F&V 981-1 4 1(A); Answer filed in 94 AMA Docket No.

F&V 981-1 9 1; Tr. 2164.) )

57. The Almond Order’s Promotion Plan requires

Cal-Almond, Inc., to pay advertising assessments for the

generic advertising and promotion of almonds by the Almond

Board, which may be avoided by engaging in branded

advertising and promotion activities, as specified in the

Almond Order. Cal-Almond, Inc., seeks to have the Almond

Order’s Promotion Plan and implementing regulations

declared unlawful as they applied to Cal-Almond, Inc.. for

the 1987-88 crop year and subsequent crop years. (Petition

filed in 94 AMA Docket No. F&V 981-1 q{ 26.)

58. Cal-Almond, Inc., sells approximately 65 per

centum of the almonds it handles for export and

approximately 35 per centum in the domestic market. Most

almond handlers ship only brown almonds. Beginning in

1988, Cal-Almond, Inc., extensively increased its product

lines to include manufactured almonds that are sliced. diced,

and blanched. (CA 3 4 3.)

96a

Appendix D

59. In 1989, Cal-Almond, Inc., manufactured

approximately 50 per centum of its almonds into specialty

products which include blanched, sliced, diced, and super

premium brown almonds. In the 1993-94 crop year,

Cal-Almond, Inc., handled approximately 30 million pounds

of almonds; approximately 80 per centum of these almonds

were manufactured into specialty products. At the time of

the hearing in this proceeding, Cal-Almond, Inc., anticipated

handling approximately 40 million pounds of almonds during

the 1994-95 crop year, approximately 80 per centum of which

would be manufactured into specialty products. (CA 3 4 3.)

60. Cal-Almond, Inc.’s manufactured items are used as

ingredients in ice creams, cereals, bakery goods, candy bars,

and other confectionery items. (CA 3 { 5.)

61. Cal-Almond, Inc., at considerable expense, has so

successfully developed the Cal-Almond label that many

buyers and brokers, at the urging of an end user, have called

Cal-Almond, Inc., requesting the Cal-Almond label because

of its assurance of quality, timeliness of shipment, and

competitive price. (CA 3 ¥ 5.)

62. In 1988, Cal-Almond, Inc., expanded its facilities

to house newly purchased blanching and cutting units. The

cost of the newly purchased equipment was in excess of ¢:

million dollars. In addition, Cal-Almond, Inc., incurred ..¢

cost of propane tanks to heat the blanching water, plumbing,

recycled water systems, and necessary county permits.

(CA 3 ¥ 6.)

97a

Appendix D

63. Since 1988, Cal-Almond, Inc., has expanded its

roasting trade from pure oil roasting to dry roasting because

several of Cal-Almond, Inc.’s buyers in the cereals, bakery,

and candy bar trade desired dry roasted almonds; and in 1992,

Cal-Almond, Inc., purchased dry roasting equipment for

approximately $200,000. (CA 3 4 6.)

64. Cal-Almond, Inc., has spent approximately

$500,000 for additional equipment for blanching, slicing,

and dicing to supply greater quality assurance and to meet

customer specifications. In the summer of 1994, Cal-Almond,

Inc., spent approximately $150,000 for the most modern

dicing unit, again to meet buyer specifications. (CA 3 4 6.)

65. In 1987 and 1988, Cal-Almond, Inc., spent $350,000

for additional cold storage warehousing so that Cal-Almond,

Inc., would have the ability to market almonds throughout

the crop year. (CA 3 4 6.)

66. In the summer of 1994, Cal-Almond, Inc., spent one

million dollars to improve and expand its shelling line, and

at the time of the hearing in this proceeding, an additional

warehouse was being built at a cost of $1 50,000. (CA 3 4 6.)

67. In 1994, Cal-Almond, Inc., also installed a LMC

pre-cleaning and cleaning line at a cost of $350,000. The

LMC pre-cleaning and cleaning line was installed to meet

major domestic and export buyer specifications. (CA 3 4 7.)

68. During tours of Cal-Almond, Inc.’s facilities,

visiting buyers, brokers, and customers suggested added

safeguards and extra “cleanliness” developments, stating that

98a

Appendix D

they would be interested in purchasing more products from

Cal-Almond, Inc., if it was able to make the suggested

changes. Cal-Almond, Inc., complied with these requests.

(CA 34 7.)

69. As a result of a buyer request, Cal-Almond, Inc.,

put in new flooring in one of its buildings for approximately

$75,000, and it expanded the floor space of its roasting

operation in order to allow the loading and unloading of

almonds without exposing the almonds to the elements

outside. In order to meet further buyer specifications,

Cal-Almond, Inc., added eight electronic sorting machines

at a cost of approximately $40,000 per machine to increase

the quality of its product. (CA 34 7.) Cal-Almond, Inc., has

upgraded its computer systems at considerable expense to

accommodate customer shipping and label making. (CA 3

{ 8.)

70. Since being employed by Cal-Almond, Inc., in

October 1988, Mr. Bill Grant Dryden, the Quality Assurance

and Production Manager, has spent approximately 30 per

centum of his time with buyers and customers. He has

conducted tours of Cal-Almond, Inc.’s facilities for buyers

and customers; reviewed buyer specifications for products;

and made adjustments for purchasers in order to comply with

their specifications. When customers arrive at Cal-Almond,

Inc., the company entertains them. The customers are flown

in Cal-Almond, Inc.’s airplanes to Yosemite National Park,

taken to breakfast, lunch, and dinner, and otherwise fully

hosted at Cal-Almond, Inc.’s expense. (CA 348.)

Bi aaah ahi eer ss eas ae:

99a

Appendix D

71. At least once a year, Mr. Dryden and Mr. Tyler

Angle travel to Europe and other places in order to meet

with customers, buyers, and brokers, and Cal-Almond, Inc.,

and Mr. Dryden have found that these visits are particularly

valuable in promoting the Cal-Almond, Inc.. product. (CA 3

1 8.)

72. Mr. Dryden spends considerable time on the

telephone with buyers and customers to promote

Cal-Almond, Inc.’s product, listen to the concerns of buyers

and customers, and provide assurances that Cal-Almond,

Inc., can continue to meet buyer specifications. (CA 3 4 8.)

There are several Cal-Almond, Inc.., employees who are

constantly on the telephone with buyers and customers or

meeting with buyers and customers to increase almond sales.

(CA 3 4 13.) These contacts are extremely important to

Cal-Almond, Inc.’s promotion of its almonds. (CA 3 4 8.)

Mr. Dryden has worked with customers to develop new

products and new manufacturing techniques in order to

provide the buyers and customers with even more alternatives

_ for almonds. (CA 3 4 9.)

73. Historically, foreign and domestic buyers of

almonds would buy almonds in their brown natural state,

and those buyers and customers would blanch, Slice, dice,

and otherwise manufacture the almonds for resale or use as

ingredient products. By virtue of Cal-Almond, Inc.’s quality

control efforts and equipment and its salesmanship,

Cal-Almond, Inc., now provides manufacturing services,

which have increased Cal-Almond, Inc.’s profits. (CA 3

1 9.)

100a

Appendix D

74. Buyers have learned as a result of Cal-Almond,

Inc.’s special expertise, quality control, and equipment, that

Cal-Almond, Inc., using its own facilities and machinery,

can provide those buyers with a better product than the buyers

can produce with their own manufacturing equipment.

Cal-Almond, Inc., has expended much time and money to

convince buyers and customers to utilize Cal-Almond, Inc.'s

services, and as a result, Cal-Almond, Inc., has increased

the tonnage that it manufactures from approximately 50 per

centum of Cal-Almond, Inc.’s sales in 1989 to approximately

80 per centum of Cal-Almond, Inc.’s sales in 1994. (CA 3

4 9.) Cal-Almond, Inc., runs its blanching operation 365 days

a year, 24 hours a day, to keep up with the demand for Cal-

Almond, Inc.’s blanched products. (Tr. 2171-72.)

75. Cal-Almond, Inc., pays the Almond Board

advertising assessments between $400,000 and $600,000 per

year. (CA 3 12.) For the 1992-93 crop year, Cal-Almond,

Inc.’s creditable advertising assessment was $366,431.83.

(CA 2.) Cal-Almond Inc.’s credit-back advertising assessment

for the 1993-94 crop year was $288,440.30. (CA 1.) None

of Cal-Almond, Inc.’s expenditures for equipment, product

enhancement, or personal selling to the customers is

approved for credit under the advertising provisions of the

Almond Order. (CA 3 4 9.)

76. Cal-Almond, Inc., has developed an almond flour,

which the Almond Board never advertises. Cal-Almond, Inc.,

developed its own buyers for almond flour and has developed

a sizeable market for almond flour. (Tr. 2169-70.)

Pepeiiasitp Ji ait ki sesesidh

10la

Appendix D

77. If the Almond Order’s Promotion Program did not

exist, Cal-Almond, Inc., would continue to promote its

product in the method and manner described in Findings of

Fact Nos. 58-74, but would have more money for its own

Promotion. (CA 3 4 12; Tr. 2184-85.)

78. Mr. Cloid Angle, who at the time of the hearing in

this proceeding was 59 years old, has been a grower of

almonds all of his life and has been an almond handler for

20 years. (Tr. 2164-66.) Mr. Cloid Angle believes that

Cal-Almond, Inc., was able to grow quickly because it kept

its growers happy and because of its personal service to its

buyers. (Tr. 2167-68.)

Central Valley Grower Packing

79. Central Valley Grower Packing is a handler, as

defined in section 981.13 of the Almond Order (7 C.F.R.

§ 981.13 (1994)), subject to regulation under the Almond

Order (7 C.F.R. pt. 981). (CVG 741.)

80. Central Valley Grower Packing’s mailing address

and principal place of business is 512 Heatherwood Drive,

Madera, California 93637. (Petition filed in94 AMA Docket

No. F&V 981-4 { 1(C); Answer filed in 94 AMA Docket

No. F&V 981-44 3.)

81. Central Valley Grower Packing is asole proprietorship,

and Mr. Robert W. Christian is the soie owner of Central

Valley Grower Packing. (Petition filed in 94 AMA Docket

No. F&V 981-4 4 1(C); Answer filed in 94 AMA Docket

No. F&V 981-4 9 3: CVG 74 1.)

102a

Appendix D

82. The Almond Order’s Promotion Plan requires

Central Valley Grower Packing to pay advertising

assessments for the generic advertising and promotion of

almonds by the Almond Board, which may be avoided by

engaging in branded advertising and promotion activities,

as specified in the Almond Board. Central Valley Grower

Packing seeks to have the Almond Order's Promotion Plan

and implementing regulations declared unlawful as they

applied to Central Valley Grower Packing for the 1986-87

crop year and subsequent crop years. (Petition filed in

94 AMA Docket No. F&V 981-4 § 29.)

83. Central Valley Grower Packing has no retail store

shelf almonds, but sells its almonds for use as ingredients in

other products. (CVG 7 4 2.) More than 90 per centum of

Central Valley Grower Packing’s almond production during

the 1986-87 crop year through the 1992-93 crop year was

exported. During the 1986-87 crop year through the 1992-93

crop year, the Almond Board had no export promotional

program, only a domestic promotional program. (CVG 7

q 2.)

84. Central Valley Grower Packing has found that the

best way to sell its almonds to its foreign buyers is to provide

personalized service and meet the buyers’ quality requirements.

(CVG 7 ¥ 2.)

85. Central Valley Grower Packing paid the advertising

assessments to the Almond Board in order to receive the

150 per centum credit. (CVG 7 4 2.) Exhibits CVG 1 through

CVG 6 are the Almond Board Assessment Notices to Central

Valley Grower Packing showing the number of pounds of

103a

Appendix D

almonds handled by Central Valley Grower Packing and the

advertising assessments for the 1986-87 crop year through

the 1992-93 crop year. (CVG 1-6,79 1.)

86. If Central Valley Grower Packing did not have to

pay advertising assessments to the Almond Board for the

generic almond promotion program, Central Valley Grower

Packing would have used the money to further promote its

product in the export market, spent more money on product

research and development in an attempt to expand Central

Valley Grower Packing’s inarket, and paid growers a higher

return. (CVG 7 § 2.)

Del Rio Nut Company

87. Del Rio Nut Company is a handler, as defined in

section 981.13 of the Almond Order (7 C.F.R. § 981.13

(1994)), subject to regulation under the Almond Order

(7 C.F.R. pt. 981). (DRN 3 at 2.)

88. Del Rio Nut Company’s mailing address is P.O. Box

396, Livingston, California 95334. (Petition filed in 94 AMA

Docket No. F&V 981-3 4 1.)

89. Del Rio Nut Company’s principal place of business

is Livingston, California. (Petition filed in 94 AMA Docket

No. F&V 981-3 4 1.)

90. Del Rio Nut Company was incorporated on

December 3, 1987. Mr. David J. Arakelian is the president

and chief executive officer of Del Rio Nut Company and

Ms. Diane Arakelian is the secretary of Del Rio Nut

104a

Appendix D

Company. (Petition filed in94 AMA Docket No. F&V 981-3

4q 1; DRN 3 at 2.)

91. The Almond Order’s Promotion Plan requires

Del Rio Nut Company to pay advertising assessments for

the generic advertising and promotion of almonds by the

Almond Board, which may be avoided by engaging in

branded advertising and promotion activities, as specified

in the Almond Order. Del Rio Nut Company seeks to be

relieved from any obligation to pay for any promotional or

marketing activities undertaken by the Almond Board.

(Petition filed in 94 AMA Docket No. F&V 981-3 4 7.)

92. Del Rio Nut Company has been a handler of almonds

since 1987. The principal markets for Del Rio Nut

Company’s almonds are food manufacturers and export

organizations. Del Rio Nut Company has no retail sales.

(DRN 3 at 2.)

93. Del Rio Nut Company’s creditable advertising

assessment for crop years 1987-88 through 1992-93 are stated

in DRN 3 at 2-3. For the 1993-94 crop year, Del Rio Nut

Company’s advertising assessment was $42,168.05.

(DRN 3 at 4.)

94. Mr. Arakelian believes that the most useful form of

advertising Del Rio Nut Company’s product is direct contact

with buyers. (DRN at 3.) Mr. Arakelian promotes Del Rio

Nut Company’s product by informing customers of the

positive qualities of the Del Rio Nut Company and its

product. Mr. Arakelian personally visits customers and has

customers visit the Del Rio Nut Company’s facility. On one

105a

Appendix D

occasion Mr. Arakelian flew 4,000 miles to visit a company

which was involved in importing associated products, but

was not at that point buying almonds. (Tr. 20] -02.)

Frazier Nut Farms, Inc.

95. Frazier Nut Farms, Inc., is a handler, as defined in

section 981.13 of the Almond Order (7 C.F.R. § 981.13

(1994)), subject to regulation under the Almond Order

(7 C.F.R. pt. 981).

96. Frazier Nut Farms, Inc.’s mailing address and

principal place of business is 10830 Yosemite Boulevard,

Waterford, California 95326. (Petition filed in 94 AMA

Docket No. F&V 981-1] 4 1(C); Answer filed in 94 AMA

Docket No. F&V 981-1 q 3.)

97. Frazier Nut Farms, Inc., is a corporation which was

incorporated in the State of California on March 30, 1981.

Mr. Jim Frazier, Sr., was, at the time Frazier Nut Farms,

Inc., filed its petition in the proceeding captioned 94 AMA

Docket No. F&V 981-1 , the president of Frazier Nut Farms,

Inc.; Mr. Jim Frazier, Jr., was, at the time Frazier Nut Farms,

Inc., filed its petition in the proceeding captioned 94 AMA

Docket No. F&V 981-1, the vice president of Frazier Nut

Farms, Inc.; and Ms. Heidi Frazier Slacks is the secretary

and treasurer of Frazier Nut Farms, Inc. (Petition filed in

94 AMA Docket No. F&V 981-1 4 1(C); Answer filed in

94 AMA Docket No. F&V 981-1] { 3.) Mr. Jim Frazier, Jr.,

became the president of Frazier Nut Farms, Inc., sometime

between January 25, 1994, and November 4, 1994. (Petition

filed in 94 AMA Docket No. F&V 981-1 4 1(C); FN 3 4 1.)

106a

Appendix D

98. The Almond Order’s Promotion Plan requires

Frazier Nut Farms, Inc., to pay advertising assessments for

the generic advertising and promotion of almonds by the

Almond Board, which may be avoided by engaging in

branded advertising and promotion activities, as specified

in the Almond Order. Frazier Nut Farms, Inc., seeks to have

the Almond: Order’s Promotion Plan and implementing

regulations declared unlawful as they applied to Frazier Nut

Farms, Inc., for the 1987-88 crop year and subsequent crop

years. (Petition filed in 94 AMA Docket No. F&V 981-1

q 26.)

99. Frazier Nut Farms, Inc., handled 1,290,912 pounds

of almonds in the 1992-93 crop year and 870,010 pounds of

almonds in the 1993-94 crop year. (FN 1, FN 2.)

100. Frazier Nut Farms, Inc., sells brown almonds and

most of its almonds are exported. Frazier Nut Farms, Inc.,

finds that the best way to promote its product is to meet with

buyers, have one-on-one sales meetings with buyers, and

make plant improvements. (FN 3 § 2.) Mr. Jim Frazier, Jr.,

believes that the Frazier name itself generates the interest in

Frazier Nut Farms, Inc.’s product. (Tr. 214-15.)

101. Frazier Nut Farms, Inc., is a much larger walnut

processor than it is an almond processor, but many of Frazier

Nut Farms, Inc.’s buyers buy both walnuts and almonds.

Under the Almond Board’s 1992-93 creditable advertising

program, Frazier Nut Farms, Inc., could not obtain credit

for promoting almonds along with “competing nuts,” which

would include walnuts. (FN 3 { 2.)

see aia rah SRS RET ta na RO tC 5 NC,

Ge NET ee

107a

Appendix D

102. Under the new credit-back rules, which restrict

credits to two-thirds of the amount spent, a handler can

receive credit for the Promotion of both walnuts and almonds,

but the amount of the credit reflects the portion of the product

weight represented by almonds. (FN 3 q 2.)

103. If there were no Almond Board advertising

assessments, Frazier Nut Farms, Inc., would increase the

quality control of its product, expand the types of products

that Frazier Nut F arms, Inc., processes, and increase Frazier

Nut Farms, Inc.’s customer base. (FN 3 q 2.)

Gold Hills Nut Company, Inc.

104. Gold Hills Nut Company, Inc., is a handler, as

defined in section 981.13 of the Almond Order (7 C.F.R.

§ 981.13 ( 1994)), subject to regulation under the Almond

Order (7 C.F.R. pt. 981).

105. Gold Hills Nut Company, Inc.’s mailing address

is P.O. Box 482, Snelling, California 95369. (Petition filed

in 94 AMA Docket No. F&V 981-19 1(B); Answer filed in

94 AMA Docket No. F&V 981-1 4 2.)

106. Gold Hills Nut Company, Inc.’s principal place of

business is 3728 Turlock Road, Snelling, California 95369.

(Petition filed in 94 AMA Docket No. F&V 981- | { 1(B);

Answer filed in 94 AMA Docket No. F&V 981-] q 2.)

107. Gold Hills Nut Company, Inc., is a corporation

which was incorporated in the State of California on October

21, 1986. Mr. Bill Phipps is the president and chief financial

108a

Appendix D

officer of Gold Hills Nut Company, Inc., and Mr. Mike Stiles

is the secretary of Gold Hills Nut Company, Inc. (Petition

filed in 94 AMA Docket No. F&V 981-1 9 1(B); Answer

filed in 94 AMA Docket No. F&V 981-1 4 2; GH 3 § 1.)

108. The Almond Order’s Promotion Plan requires Gold

Hills Nut Company, Inc., to pay advertising assessments for

the generic advertising and promotion of almonds by the

Almond Board, which may be avoided by engaging in

branded advertising and promotion activities, as specified

in the Almond Order. Gold Hills Nut Company, Inc., seeks

to have the Almond Order’s Promotion Plan and

implementing regulations declared unlawful as they applied

to Gold Hills Nut Company, Inc., for the 1987-88 crop year

and subsequent crop years. (Petition filed in 94 AMA Docket

No. F&V 981-1 § 26.)

109. Gold Hills Nut Company, Inc., began handling

almonds in 1986. (GH 3 § 1.) For the 1992-93 crop year,

Gold Hills Nut Company, Inc., handled 5,632,793 pounds

of almonds, all of which were sold for export. (GH 1, GH 3

4 3.) For the 1993-94 crop year, Gold Hills Nut Company,

Inc., handled 9,997,462 pounds of almonds, all of which were

sold for export. (GH 2, GH 3 ¥ 3.)

110. Approximately 20 per centum of the crop handled

by Gold Hills Nut Company, Inc., is owned and grown by

Mr. Phipps. (GH 3 4 3.)

111. For the 1992-93 crop year, almost all of Gold Hills

Nut Company, Inc.’s creditable advertising assessment was

spent buying 2-ounce packages of almonds from the Almond

109a

Appendix D

Board to be distributed to schools and churches. Gold Hills

Nut Company, Inc., bought them in order to receive the credit

under the Almond Order advertising regulations. (GH 3

14.)

In 1994, Gold Hills Nut

1% million dollars on equipment

Provide high quality manufactured

hat Gold Hills Nut

al sums of money

Sly bought Spanish

Hills Nut Company,

y be credited against

advertising program.

113. Over the last 3 years, Gold Hills Nut Company,

Inc., has, at its cost, entertained a number of customers who

have come to the Gold Hills Nut Company, Inc.’s facility.

Gold Hills Nut Company, Inc., entertains these customers

as part of its effort to prove to those customers that Gold

Hills Nut Company, Inc., can provide the best quality product

possible with timely shipments and excellent service. None

of these entertainment expenditures may be credited against

assessments under the advertising provisions of the Almond

Order. (GH 3 4] 6.)

110a

Appendix D

114. Gold Hills Nut Company, Inc., not only contacts

buyers that already buy almonds, but also has contacted

potential customers that have not previously bought almonds.

(Tr. 1916-18.)

115. Gold Hills Nut Company, Inc., has slightly

discounted its price to buyers overseas who advertise

products which are made from Gold Hills Nut Company,

Inc.’s almonds. Gold Hills Nut Company, Inc., believes this

to be a good investment because the buyer will buy more of

Gold Hills Nut Company, Inc.’s product when consumption

increases as a result of the buyers’ advertising program, but

the discount provided by Gold Hills Nut Company, Inc., may

not be credited against assessments under the advertising

provisions of the Almond Order. (Tr. 1929-31.)

116. The new credit-back program has expanded the

ways in which a handler may receive credit for market

promotion activities, but Gold Hills Nut Company, Inc.,

believes the new credit-back regulations to be even more

burdensome than the creditable regulations in that a handler

can receive only two-thirds credit for its expenditures for

qualified promotional activities under the credit-back

regulations. (GH 3 § 7.)

117. Gold Hills Nut Company, Inc., believes that it

knows best how to market its product; that the competitive

returns that Gold Hills Nut Company, Inc., has paid its

growers have not been caused by any Almond Board

advertising program; and that if the Almond Board’s

advertising program did not exist, Gold Hills Nut Company,

Inc., could make more money and could pay its growers more

money. (GH 3 { 7.)

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Appendix D

Hocker Nut Farm

118. Hocker Nut Farm is a handler, as defined in section

981.13 of the Almond Order (7 C.F.R. § 981.13 (1994)),

subject to regulation under the Almond Order (7 C.F.R.

pt. 981). (HNF 6 4 1.)

119. Hocker Nut Farm’s mailing address and principal

place of business is 10526 Goulart Road, Turiock, California

95380. (Petition filed in 94 AMA Docket No. F&V 981-4

{| 1(D); Answer filed in 94 AMA Docket No. F&V 981-4

{ 4).

120. Hocker Nut Farm is a California partnership, and

the partners are Doyle Hocker and Steve Hocker. (Petition

filed in 94 AMA Docket No. F&V 981-4 4 1(D); Answer

filed in 94 AMA Docket No. F&V 981-4 7 4: HNF 6 q 1.)

121. The Almond Order’s Promotion Plan requires

Hocker Nut Farm to pay advertising assessments for the

generic advertising and promotion of almonds by the Almond

Board, which may be avoided by engaging in branded

advertising and promotion activities, as specified in the

Almond Order. Hocker Nut Farm seeks to have the Almond

Order’s Promotion Plan and implementing regulations

declared unlawful as they applied to Hocker Nut Farm for

the 1986-87 crop year and subsequent crop years. (Petition

filed in 94 AMA Docket No. F&V 981-4 4 29.)

122. Hocker Nut Farm has been a handler of almonds

from and including the 1986-87 through the 1993-94 crop

years. During the period 1986 through 1993, Hocker Nut

112a

Appendix D

Farm handled the pounds of almonds listed in paragraph |

of Mr. Steve Hocker’s November 3, 1994, written

declaration, HNF 6. (HNF 6 1.)

123. Approximately 95 per centum of Hocker Nut

Farm’s almonds are exported, and Hocker Nut Farm only

sells brown almonds, not manufactured almonds. However,

Hocker Nut Farm custom manufactures products for other

handlers. (HNF 6 1.)

124. Hocker Nut Farm has found that the best way to

promote its product is salesmanship and one-on-one

conversations with its buyers. (HNF 6 § 2.) Hocker Nut Farm

sells its almonds through personal contacts and has

communicated with manufacturers that do not currently use

almonds in an effort to convince them to use almonds in

their products. (Tr. 254-55.)

125. During the time the creditable advertising rules

were in effect, Hocker Nut Farm would advertise that its

country store sells almonds. Further, Hocker Nut Farm

advertised its product in the newspaper and on the radio, but

with very limited success. (Tr. 256.) However, once the

Almond Board approved receiving 150 per centum credit

for early payments of the advertising assessments, Hocker

Nut Farm paid the Almond Board directly, virtually every

year, in order to receive the 150 per centum credit. (HNF 6

{ 2.)

126. If Hocker Nut Farm was not required to participate

in the Almond Board’s advertising program, Hocker Nut

Farm would use the money that it saves to increase the

Peg s.r e: alia

113a

Appendix D

efficiency and improve the quality of Hocker Nut Farm’s

equipment. (HNF 6 q 2.)

Jardine Organic Ranch

127. Jardine Organic Ranch is a handler, as defined in

section 981.13 of the Almond Order {7 C.F.R. § 981.13

(1994)), subject to regulation under the Almond Order

(7 C.F.R. pt. 981).

128. Jardine Organic Ranch’s mailing address and

principal place of business is 910 Nacimiento Lake Drive,

Paso Robles, California. (Petition filed in 94 AMA Docket

No. F&V 981-4 { 1(E); Answer filed in 94 AMA Docket

No. F&V 981-44 5.)

129. Jardine Organic Ranch is a sole proprietorship, and

Mr. Duane Jardine is the sole owner of Jardine Organic

Ranch. (Petition filed in 94 AMA Docket No. F&V 981-4

| 1(E); Answer filed in 94 AMA Docket No. F&V 981-4

1 5.)

130. The Almond Order’s Promotion Plan requires

Jardine Organic Ranch to pay advertising assessments for

the generic advertising and promotion of almonds by the

Almond Board, which may be avoided by engaging in

branded advertising and promotion activities, as specified

in the Almond Order. Jardine Organic Ranch seeks to have

the Almond Order’s Promotion Plan and implementing

regulations declared unlawful as they applied to Jardine

Organic Ranch for the 1986-87 crop year and subsequent

crop years. (Petition filed in 94 AMA Docket No.

F&V 981-49 29.)

114a

Appendix D

131. From crop year 1986-87 through the date on which

Mr. Duane Jardine executed his November 3, 1994, written

declaration, Jardine Organic Ranch has marketed only

organically grown almonds, and organically grown almonds

account for less than 1 per centum of all of the almonds grown

in California. (JOR 1 ¥ 1.)

132. Jardine Organic Ranch handles between 40,000 and

120,000 pounds of almonds per year, and Jardine Organic

Ranch is assessed between $1,000 and $3,500 per year by

the Almond Board for the generic advertising program.

(JOR 1 ¥ 1.) |

133. All of Jardine Organic Ranch’s buyers insist upon

organically grown and processed almonds; and therefore,

Jardine Organic Ranch’s almonds do not compete with 99

per centum of the almonds grown in California. (JOR 1 § 1.)

134. Jardine Organic Ranch’s buyers are willing to pay

a premium price for organically grown almonds. The Almond

Board’s promotional program has never promoted or

advertised organically grown almonds, and Jardine Organic

Ranch does not want to be associated with any organization

that does not promote organically grown products. (JOR 1

q 1.)

135. Jardine Organic Ranch markets its almonds by

contacting buyers by telephone and meeting potential buyers

at Jardine Organic Ranch’s booths at food expositions. Other

buyers learn of Jardine Organic Ranch’s product through

promotional work done by the Farm Verified Organic

Program, an organization which is not connected to the

115a

Appendix D

Almond Board and which promotes certified organic

products. (JOR 1 § 2.) On several occasions, Jardine Organic

Ranch has redesigned boxes and packaging using different

labeling and sizes to accommodate customers, but Jardine

Organic Ranch received no credit under the advertising

provisions of the Almond Order for expenses connected with

these efforts. (JOR 1 | 2.) On at least two occasions since

the 1

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