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AGRICULTURAL MARKETING AGREEMENT ACT
ANN M. VENEMAN, IN HER OFFICIAL CAPACITY AS THE SECRETARY OF THE CALIFORNIA DEPARTMENT OF FOOD AND AGRICULTURE AND ON BEHALF OF THE CALIFORNIA MILK PRODUCERS ADVISORY BOARD, AND FRANK HILARIDES, A CALIFORNIA DAIRY FARMER v. DAN GLICKMAN, IN HIS OFFICIAL CAPACITY AS THE SECRETARY OF THE UNITED STATES DEPARTMENT OF AGRICULTURE.
No. CIV-S-97-0973 DFL PAN.
AMAA - Standing, representational interest - Discovery of mental processes, Morgan rule Enumerated powers, when not improper delegation of – Rule making, when not required · F.O.I.A., when not subject to – Nickel, fiscal control of assessment.
The Secretary of the California Department of Food and Agriculture (“CDFA”) brought suit on behalf of the California Milk Producers Advisory Board ("CMAB”), a west coast oriented milk producers organization, alleging that the creation of an intermediary not-for-profit private corporation, Dairy Management, Inc. (“DMI”) based in Washington, DC, has greatly diminished their sphere of influence regarding the policies of the National Dairy Promotion and Research Board ("Board"). CMAB, one of 13 geographical regions, asserts that milk producers in regions other than the west coast now unduly influence decisions of the Board. The various programs administered by the Board are sponsored by the United Dairy Industry Association (“UDIA”). UDIA, an Illinois not-for-profit corporation, is a federation of 18 state and regional boards that pay dues to the UDIA. In a secret ballot meeting, the UDIA and the Board jointly created DMI to handle administrative matters common to both the Board and UDIA. The U.S. District Court determined that:
(1) CMAB has representational standing to sue - citing three criteria.
(2) ALJ did not err in denying examination of the mental processes/motives of administrative officers of Board, citing U.S. v Morgan.
(3) Formation of DMI did not violate Government Corporation Control Act (31 U.S.C. § 9102) nor exceed the enumerated powers of the Board under 7 C.F.R. § 1150.139.
(4) Board did not improperly delegate its powers and duties to DMI when Board retained power to review and fund DMI.
(5) Board is not required to seek review and comment under A.P.A. (5 U.S.C. § 553).
(6) DMI (a private corporation) is not subject to F.O.I.A. requests.
(7) Petitioner failed to show actionable conflicts of interest by the Board.
(8) Petitioner failed to show that Board exceeded the maximum amount allowed for administrative expenses under 7 C.F.R. § 1150 by creation and delegation to DMI.
United States District Court
AND AGRICULTURE, et. al. v. USDA
60 Agric. Dec. 382
MEMORANDUM OF OPINION AND ORDER
Plaintiffs Ann M. Veneman, Secretary of the California Department of Food and Agriculture, and Frank Hilarides, a California dairy farmer, bring this action for judicial review of a decision by a Judicial Officer of the United States Department of Agriculture ("USDA") dismissing their Petition to Modify or Be Exempted From the Provisions of the Dairy Promotion and Research Order ("Petition"). Plaintiffs challenge the legality of an arrangement between the National Dairy Promotion and Research Board and the United Dairy Industry Associates ("UDIA") to create a private not-for-profit corporation, Dairy Management, Inc. (“DMI"), for the purpose of performing administrative, financial, and management functions for both the National Dairy Promotion and Research Board and UDIA. Plaintiffs and defendant Dan Glickman, Secretary of USDA, make cross-motions for summary judgment.
A. THE PARTIES
I. FACTUAL BACKGROUND
Congress authorized the creation of the National Dairy Promotion and Research Board' in Title I, subtitle B, of the Dairy and Tobacco Adjustment Act of 1983 ("Act"), Pub. L. 98-180, 97 Stat. 1128, codified at 7 U.S.C. § 4501, et seq. The Act provides for the issuance of a dairy products promotion and research order by the Secretary of USDA. 7 U.S.C. § 4503. The Act also requires that the Secretary's order contain certain terms and conditions, for example setting the size and composition of the National Board, establishing the Board's powers and duties, and authorizing the Board to collect an assessment from milk producers. See 7 U.S.C. § 4504.
The National Board was formally created on March 28, 1994 by the Dairy Research and Promotion Order ("Order"). 7 C.F.R. Part 1150. The Board has thirty-six members who are milk producers appointed by the Secretary of USDA for the purpose of representing thirteen geographic regions within the United States. 7 C.F.R. 1150.131. Defendant Dan Glickman, the Secretary of USDA, is responsible for the administration of the Board. (Pls.' Fact 4).
'The cognoscenti refer to the National Dairy Promotion and Research Board as "the NDB" or just "NDB." In a surely bootless effort to avoid undue and confusing use of acronyms in this opinion, the court will generally refer to the National Dairy Promotion and Research Board as the "National Board" or the "Board.”
The National Board is funded by mandatory assessments on the payments by wholesale purchasers of milk to milk producers. 7 U.S.C. § 4504(g). The total assessment is fifteen cents per hundredweight of milk. Id. Milk producers who participate and contribute funds as members of active, qualified state or regional dairy product promotion programs may receive a credit on the assessment of up to ten cents per hundredweight of milk. Id. The ten cents per hundredweight, which is assigned to state and regional programs, is commonly referred to as the "dime,” and the five cents reserved for the National Board is called the "nickel."
Plaintiff Ann Veneman brings this suit in her official capacity as the Secretary of the California Department of Food and Agriculture ("CDFA") and on behalf of the California Milk Producers Advisory Board ("CMAB”). CMAB is an unincorporated advisory board representing all California dairy farmers who pay assessments to the National Board.2 CMAB is an instrumentality of the State operating under the umbrella of the CDFA. (Pls.' Facts 1, 2). Secretary Veneman is responsible for collecting the mandatory assessments payable to the National Board from California dairy farmers and for the administration of CMAB. (Pls.' Fact 1). Frank Hilarides is a California dairy farmer and is CMAB's chairman of the Board. (Pls.' Fact 3). CMAB is a qualified state or regional program under the Act. (Administrative Record ("Rec.") at 1200-01).
Although not a party, the United Dairy Industry Associates (“UDIA”) is a central figure in the events that serve as the basis of this litigation. UDIA is an Illinois not-for-profit corporation. (Def.'s Fact 3; Pls.' Fact 7). It is a federation of eighteen state and regional dairy research promotion boards that pay annual dues to UDIA. (Pls.' Facts 8-9). Members also make payments to UDIA-known as "user pays" and "pools"-to pay for their share of various programs sponsored by
2CMAB was established by Order of the Secretary of the CDFA pursuant to the California Marketing Act of 1937, codified at California Food & Agriculture Code § 58601, et seq
'The requirements necessary to become a qualified state or regional dairy regional programs are set forth in 7 C.F.R. § 1150.153.
4A "user pay" represents the state or region's share of the cost of a particular program in which it elects to participate. (Pls.' Fact 11). A "user pool" represents the ideal or required amount of funding necessary for a particular program: when it is in their interest to do so, participants may contribute more than their proportionate share. (Pls.' Fact 12).
AND AGRICULTURE, et. al. v. USDA
60 Agric. Dec. 382
UDIA. CMAB and qualified state or regional dairy promotion boards in four other states-Oregon, Washington, Wisconsin, and Louisiana-operate independently of UDIA.S
B. THE ESTABLISHMENT OF DMI
On March 16, 1994, staff members of the National Board and UDIA orally presented the concept of consolidating the staffs of the two organizations at an executive session of the National Board. (Pls.' Fact 74). The proposed merger of the National Board and UDIA staffs allegedly generated apprehension in some quarters that the consolidation would work to the disadvantage of West Coast milk producers. (See Pls.' Fact 79). In a vote by secret ballot, the National Board adopted the staff recommendation by a vote of twenty-seven to seven. (Pls.' Facts 75-76). The Board and UDIA publicly announced the proposed creation of DMI on March 17, 1994.
The two organizations entered into a formal agreement to create DMI on April 27, 1994. Under the terms of the agreement, DMI has a number of enumerated purposes:
(1) To implement joint programs and projects between NDB and UDIA; (2) To provide funding, management, staff and other resources, and to plan, develop, and implement programs authorized under federal and state dairy check-off programs;
(3) To provide resources for program evaluation and market research to the NDB and UDIA;
(4) To manage benefit programs for employees of the Corporation, the parties, and related organizations;
(5) To implement specific NDB- and UDIA-funded programs; and
(6) To carry out the administrative, financial and management functions of NDB and UDIA and the Corporation.
(Rec. at 1251A).
DMI was formed as a not-for profit corporation in Washington, D.C. on May 31, 1994. (Pls.' Fact 14). Silvio Capponi, Jr., the Acting Director of the Dairy
"California, Oregon, Washington and Wisconsin have formed COWW, a regional federation for these four states that is analogous to UDIA.