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Ranchers-Cattlemen Action Legal Fund v. Perdue

United States District Court, D. Montana, Great Falls Division

June 21, 2017

RANCHERS-CATTLEMEN ACTION LEGAL FUND, UNITED STOCKGROWERS OF AMERICA, Plaintiff,
v.
SONNY PERDUE, in his official capacity as Secretary of Agriculture; and UNITED STATES DEPARTMENT OF AGRICULTURE, Defendants.

          MEMORANDUM AND ORDER

          Brian Morris United States District Court Judge.

         INTRODUCTION

         Plaintiff Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America is political advocacy and trade organization representing independent, domestic cattle producers across the United States, including Montana. Plaintiff filed this action for declaratory and injunctive relief on May 2, 2016. Plaintiff seeks a determination that the current administration of the federal Beef Checkoff Program in Montana violates the First Amendment to the United States Constitution. The Beef Checkoff Program allows the Montana Beef Council to use a portion of a federal beef checkoff to fund promotional campaigns by the Montana Beef Council.

         Defendant United States Department of Agriculture (USDA) administers the federal Beef Checkoff Program. Defendant Sonny Perdue (Perdue) serves as the Secretary of Agriculture. Perdue oversees the federal Beef Checkoff Program.

         Presently before the Court are the following motions: Defendants' Motion to Dismiss for Lack of Standing; Defendants1 Motion to Dismiss for Failure to State a Claim; Defendants' Motion to Stay; Plaintiffs Motion for Summary Judgment; Plaintiffs Motion for Preliminary Injunction; and Plaintiffs Motion for a Temporary Restraining Order.

         United States Magistrate Judge John Johnston issued Findings and Recommendations in this matter on December 12, 2016. (Doc. 44). Judge Johnston recommended that Defendants' Motions to Dismiss be denied, that Defendants' Motion to Stay be denied, that Plaintiffs Motion for Summary Judgment be denied, that Plaintiffs Motion for Preliminary Injunction be granted, and that Plaintiffs Motion for a Temporary Restraining Order be denied as moot. (Doc. 44 at 12).

         Defendants filed objections to Judge Johnston's Findings and Recommendations on December 23, 2016. (Doc. 45). Defendants argue that Judge Johnston erred when he denied their motions to dismiss, and when he granted Plaintiffs motion for a preliminary injunction. Plaintiff filed a response to the Defendants' objections on January 5, 2017. (Doc. 46).

         STANDARD OF REVIEW

         The Court reviews de novo findings and recommendations to which the parties make objections. 28 U.S.C. § 636(b)(1). No review is required of proposed findings and recommendations to which no objection has been made. Thomas v. Am, 474 U.S. 140, 149-152 (1986).

         BACKGROUND

         The Beef Promotion and Research Act of 1985 (Beef Act), 7 U.S.C. § 2901 et seq., imposes a $1 assessment on cattle producers on each head of cattle sold in the United States, and on each head of cattle imported into the United States, 7 U.S.C. §§ 2901(b), 2904(8)(C); 7 C.F.R. § 1260.172(a)(1). The assessment, also known as a checkoff, funds beef related promotional campaigns designed to "strengthen the beef industry's position in the marketplace and to maintain and expand domestic and foreign markets ... for beef and beef products. 7 U.S.C. § 2901(b).

         The "Cattlemen's Beef Promotion and Research Board" (Beef Board) administers the federal checkoff program. See 7 U.S.C. § 2904(1)-(2). The Secretary of the Agriculture appoints the Beef Board. Id. The "Beef Promotion Operating Committee" (Beef Committee) develops national promotional campaigns for the Beef Board. 7 U.S.C. § 2904(4)(B). The Beef Board's promotional campaigns must comply with the Beef Act.

         The Beef Act prohibits the Beef Board from developing promotional campaigns that distinguish between domestic and foreign beef products. See 7 U.S.C. §§ 2901, 2904(4)(B)(ii); 7 C.F.R. § 1260.169(d). The Secretary of the Agriculture must approve the Beef Board's promotional campaigns. 7 C.F.R. § 1260.169; Johanns v. LivestockMktg. Ass 'n, 544 U.S. 550, 561 (2005).

         The Beef Act allows "qualified state beef councils" to collect the checkoff assessments on behalf of the Beef Board. 7 C.F.R. § 1260.18 l(b)(2)-(4). Qualified state beef councils are private entities organized and operated within a state. 7 C.F.R. § 1260.181(a). The Montana Beef Council operates as Montana's qualified state beef council. The Montana Beef Council is a private corporation organized under the laws of Montana. (Doc. 23 at ¶ 47).

         The Montana Beef Council collects beef checkoff assessments in Montana. When the Montana Beef Council collects the $1 per-head checkoff from a cattle producer it sends 50 cents from each dollar to the Beef Board. The Montana Beef Council retains the remaining 50 cents to fund its own promotional activities. (See Doc. 1-2 at 6; 7 U.S.C. § 2904(8)(C); 7 C.F.R. § 1260.172(a)(3).

         The USDA possesses some authority over the Montana Beef Council. The USDA requires that the Montana Beef Council engage in promotional activities that promote beef and beef products. The USDA also requires that the Montana Beef Council certify that it will not use any of the money that it receives under the Beef Checkoff Program to promote "unfair or deceptive" practices, or to "influenc[e] governmental policy." See 7 C.F.R. § 1260.181(b)(7) (cross-referencing 7 C.F.R. § 1260.169(e)); see also, Beef Promotion and Research Order, 51 Fed. Reg. 26132, 26137 (July 18, 1986).

         The USDA does not control how the Montana Beef Council spends the money that it obtains from the federal Beef Checkoff Program. (See Doc. 1-2 at 7). The Montana Beef Council determines for itself how the checkoff money that it receives should be invested. (See Doc. 1-2 at 13). The Montana Beef Council uses the checkoff monies that it receives to fund advertising campaigns that promote the consumption of beef. The USDA requires only that the Montana Beef Council submit annual reports of its expenditures. See 7 C.F.R. § 1260.181(b)(6).

         The Montana Beef Council's board possesses broad discretion to determine the content of its promotional activities. The advertisements of the Montana Beef Council do not distinguish between domestic beef and foreign beef. The USDA does not supervise the Montana Beef Council's promotional campaigns. (Doc. 40-1 at ¶¶ 14-15).

         The Beef Board possesses limited authority with respect to the Montana Beef Council's promotional campaigns. Id. The Beef Board reviews the Montana Beef Council's "annual marketing plan" that "outlines" the Montana Beef Council's "planned activities" for the coming year. The Beef Board also conducts post-hoc audits of the Montana Beef Council's activities. (Doc. 40-1 at¶ 19).

         Until recently, no mechanism existed for a cattle producer to direct the Montana Beef Council to send the entire checkoff assessment to the Beef Board. Cattle producers who disagree with the Montana Beef Council's promotional activities now may direct that the full amount of their checkoff assessment be forwarded to the Beef Board by submitting a redirection request to the Montana Beef Council. See Beef Promotion and Research; Amendments to Allow Redirection of State Assessments to the National Program, 81 Fed. Reg, 45, 984, 45986 (proposed July 15, 2016).

         The Montana Beef Council has 60 days to review the redirection request to determine whether the cattle producer has submitted the necessary paperwork to opt-out. Id. The Montana Beef Council holds the cattle producer's checkoff assessment during this review period. The Montana Beef Council must forward the full amount of the cattle producer's checkoff assessment to the Beef Board if the cattle producer provides the necessary paperwork. Id.

         Plaintiff represents domestic cattle producers in Montana. Plaintiff disapproves of the Montana Beef Council's advertising campaigns. Plaintiff disapproves of the advertisements' failure to distinguish between domestic beef and foreign beef. ...


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