In July of 2021, the United States Court of Appeals for the Ninth Circuit issued its latest and final decision in the years’ long saga that was Ranchers-Cattlemen Action legal Fund (R-CALF) v. USDA. R-CALF meandered through the federal court system for more than five years and represented the most significant constitutional challenge to the Beef Promotion and Research Program, more commonly known as the national beef checkoff, since the landmark U.S. Supreme Court decision in Johanns v. Livestock Marketing Ass’n, 544 U.S. 550 (2005). While R-CALF enjoyed success in earlier stages of the litigation, the recent decision of the Ninth Circuit was the latest pronouncement in what became a resounding legal defeat. The Ninth Circuit held, inter alia, that the speech at issue – that of third parties that receive checkoff funding from states’ Qualified State Beef Councils (QSBCs)– was “government speech” and therefore exempt from First Amendment scrutiny.
Beef Checkoff Basics
To understand the R-CALF litigation and recent Ninth Circuit decision, it is helpful to have background about the basic structure and operation of the national beef checkoff. For a more thorough discussion, see Legal Checkup on Checkoff Checkoffs: Beef Checkoff Basics, available here. See also, What is Checkoff?, available here.
The national beef checkoff is established by the Beef Promotion and Research Act of 1985 (Beef Act). The centerpiece of the Beef Act is the dollar per-head assessment on each head of cattle sold in the United States. In a typical transaction, the producer pays the assessment at the point of sale as a result of the purchaser deducting the assessment amount from the overall transaction. Next, the purchaser remits the assessments to the applicable state’s “Qualified State Beef Council” (QSBC), so long as one exists in the state in which the cattle are sold. If the state in which the transaction occurs does not have a QSBC, then the purchaser must remit the full assessment to the federal checkoff board, technically known as the Cattlemen’s Beef Board. Nearly every state has a QSBC. When remitted to a QSBC, the Beef Act requires that the QSBC remit the assessment to the Cattlemen’s Beef Board, minus what is technically known as the “producer credit.” For all practical purposes, the producer credit equals one-half of the original assessment.
Thus, in a typical transaction the QSBC physically retains fifty cents of the original dollar per-head assessment and the remaining fifty cents is remitted to the Cattlemen’s Beef Board to expend in accordance with the Beef Act and the Beef Promotion and Research Order. As explained below, R-CALF targeted the QSBC for Montana – the Montana Beef Council – and subsequently other states’ QSBCs.
Government Speech vs. Private Speech
What exactly is “government speech” versus “private speech”? The basic rule is that the government can compel a citizen to subsidize the speech of the government and not run afoul of the First Amendment free speech principles. However, the government cannot compel a citizen to subsidize the speech of a private citizen. As noted, R-CALF asserted that the Montana Beef Council (and other states’ beef councils) were private entities that used mandatory checkoff funds to engage in private speech with which its members disagreed.
R-CALF’s argument may sound familiar as it is essentially the same issue the United States Supreme Court considered in 2005 in its landmark Johanns v. Livestock Marketing Ass’n decision. In Johanns, the Supreme Court upheld the constitutionality of the national beef checkoff on the basis that the level of oversight exercised by USDA over the Cattlemen’s Beef Board and the Beef Operating Committee was extensive enough that the speech at issue was actually “government speech” regardless of whether the two entities were governmental or nongovernmental entities. In an interesting twist, R-CALF challenged the state-level Montana Beef Council, rather than the Cattlemen’s Beef Board, arguing that the Montana Beef Council was a private entity and therefore the speech of the council could not be government speech.
R-CALF, 2016 -2021: Brief Summary
On May 2, 2016 R-CALF brought its action in the United States District Court for the District of Montana. At that time, R-CALF argued that the fifty cents of the dollar per-head assessment retained by the Montana Beef Council constituted a “government-compelled subsidy of the speech of a private entity” that is unconstitutional under the First Amendment of the United States Constitution. In other words, R-CALF argued that it is unconstitutional for the Montana Beef Council to retain and expend the fifty cents of the dollar per-head assessment because the council is a private entity engaged in private speech with the checkoff funds R-CALF members are mandated to pay under the Beef Act. The issue basically boiled down to whether the Montana Beef Council (and other states’ beef councils) were engaged in private speech or government speech whenever it collected and spent checkoff funds.
For more thorough discussions of R-CALF, see Beef, Beans, & The First Amendment: Disappearing Sovereignty for State Beef Councils and Soybean Boards?, available here; Legal Checkup on Checkoffs: R-CALF, States’ Beef Councils, and the Ongoing First Amendment Challenge to the Beef Checkoff, available here; and Legal Checkup on Checkoffs: State-by-State Analysis of the USDA “Redirection Rule” & Producer Refunds Under the Beef Checkoff, available here.
During the course of the years’ long litigation, the Montana Beef Council and the USDA Agricultural Marketing Service (AMS) entered into a Memorandum of Understanding (MOU) that provided AMS direct oversight over the Montana Beef Council. The MOU, for example, grants authority to the USDA Secretary pre-approval authority over “any and all promotion, advertising, research, and consumer information plans and projects”, the authority to “decertify”, or terminate, the existence of a QSBC, and requires joint agreement by AMS and the QSBC to terminate the MOU. Subsequently, numerous other QSBCs entered into the same MOU with AMS.
USDA argued that the extensive level of oversight required by the MOU satisfied the government speech test set out in the 2005 Johanns decision. R-CALF challenged the MOUs, asserting that the court should issue a permanent injunction that enjoined AMS from discontinuing the MOU. Additionally, R-CALF argued that any government speech protection that may be offered to QSBCs by MOU does not also extend to third parties to which QSBCs may provide checkoff-derived funding. The federal district court disagreed, and R-CALF appealed to the Ninth Circuit.
July 2021 Ninth Circuit Decision
The Ninth Circuit issued holdings regarding standing and the lower court’s denial of the permanent injunction, but the “dispositive question” was “whether the speech generated by the third parties is government speech and therefore exempt from First Amendment scrutiny.” The court noted two types of funding that QSBCs can provide to third parties – contractual and non-contractual. With respect to contractual-based funding, the court stated that “Under the MOUs, the Secretary must pre-approve all contracts and any plans or projects developed under them. The parties agree that third-party speech generated pursuant to these contracts is government speech.” Thus, the core issue on appeal was whether the “non-contractual” funding to third parties is effectively government speech.
After reviewing certain “safeguards” in the Beef Act applicable to third parties that receive checkoff funding from QSBCs, the Ninth Circuit held as follows:
R-CALF argues that such safeguards are insufficient because the government does not exercise final pre-approval authority over some third-party speech. But in Paramount Land, we found dispositive the government’s ability to control speech, even when it declined to do so. . . Here, the Secretary clearly has that authority. In addition to the oversight previously mentioned, the Secretary has unquestioned control of the flow of assessment funds to the QSBCs—and the threat of decertification under the MOUs and the regulations if he disapproves of the use of those funds. . . “Just as ‘the Secretary of Agriculture does not write the copy of the beef advertisement himself’ for the Beef Board, neither should such oversight be required for the  scheme to pass constitutional muster.” . . . A contrary holding here “risks micro-managing legislative and regulatory schemes, a task federal courts are ill-equipped to undertake.”
(citations omitted) (emphasis in original).
R-CALF is a historically significant decision to add to the several court decisions issued post-Johanns. Notably, R-CALF has spawned new litigation brought by the same plaintiff in the United States District Court for the District of Columbia. In that matter, R-CALF argues that the MOUs at issue in the recent Ninth Circuit decision must go through notice-and-comment rulemaking in accordance with the Administrative Procedures Act. A subsequent article in this series will address that litigation.
R-CALF will undoubtedly be cited as authority or guidance anytime a political or legal issue is raised in regards to the transfer of checkoff funds derived from state or federal checkoff boards to third parties. Specifically, R-CALF could impact the degree to which Congress will reconsider the Opportunities for Fairness in Farming Act that was recently re-introduced in Congress. This could be especially true during the approaching debate over the 2023 Farm Bill. Finally, R-CALF has the potential to eventually impact the Soybean Promotion, Research, and Consumer Information program, otherwise known as the national soybean checkoff, given the very unique level of congruency that exists in the federal-state partnership structure, operation, and administration of both checkoff programs.