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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 2000
- **Citation:** 530 U.S. 1213

## Text

Sel eme Court, U.S.
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— 991847 FEB 10 2000
No. 99-

— P= e-em s
vt Wee Thre

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,

v.
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

i

TABLE OF APPENDICES

Appendix A — Opinion Of The United States Court
Of Appeals For The Ninth Circuit Dated And Filed
ee). a rere Sh re

Appendix B — Order Of The United States District
Court For The Eastern District Of California

Granting Defendant’s Motion To Dismiss Dated
Aaa Find AMG TS, TPFS see ce ceca census

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
fo ge A ea errr re eae a

Appendix E — Decision And Order Of The United
States Department Of Agriculture Dated June 15,
SE ag vd Na CAE AE RGAE WERE RECTERPEAS Oh

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
SY Fa SOOM uk ede es be eesccee users

Page

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12a

22a

23a

228a

il

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

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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

2a

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

Ee

3a

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

4a

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.

I]

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

Sa
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.

A

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

6a

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.

B

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

Ta

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.

8a

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

|

9a
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.

D

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.

IV

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,
V.

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

ee

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

ne

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)

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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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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

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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,

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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

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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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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.

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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;

(c) To receive, investigate and report to the
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.

(c) Creditable expenditures. The Board,
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

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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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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.

(c) The Board shall grant Credit-Back for
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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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;

(C) Printing costs for promotional material; ——

(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;

(C) Copies of all invoices from suppliers or
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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Si Ste Pee Prise yh ab adarwlnEa

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.

(c) The following requirements shal] apply
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;

(C) When either of these advertisements
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.

(C) No credit shall be granted in excess of
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.

(C) Handlers must file claims with the Board
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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386004_1019%3A2. Public record. Not legal advice.