The Ranchers-Cattlemen Action Legal Fund (“R-CALF”) and the United Stockgrowers of America have likely survived a motion to dismiss their case against USDA challenging the beef checkoff and obtained an injunction against the Montana Beef Council (“MBC”) to prevent it spending money received from the federal Beef Checkoff Board on promotion.  A federal Magistrate Judge sided with the plaintiffs in the lawsuit, which claims that the federal law requiring funding of the MBC is unconstitutional.  Additionally, the Magistrate suggests a preliminary injunction be issued, which would prohibit the MBC to use checkoff dollars to fund promotional campaigns unless they obtain affirmative permission from cattle producers that their assessment may be retained by the council and used for advertisement.  [Read full-opinion-here.]

Texas A&M Agrilife Research photo by Dr. Jim MacDonald

Background

Most producers are probably familiar with the Beef Promotion ad Research Act of 1985, more commonly referred to as the “Beef Checkoff,”  which imposes a $1.00 per head fee when cattle are sold.  The money generated from these fees is used to fund promotional campaigns and research.   Funds may be collected by a “qualified state beef council (“QSBC”),” which is required to comply with a number of rules and reporting requirements in order to be allowed to collect the funds.  Historically, 50% each dollar collected went to the federal Cattleman’s Beef Production and Research Board (“Beef Board”) and the other 50% was retained by the local qualified state beef council.  Now, however, a producer may direct that 100% of his or her assessment be sent to the federal Beef Board.

Certain Montana cattle producers were unhappy with the promotional efforts of the state’s QSBC, the Montana Beef Council, in particular because the MBC did not make any distinction between foreign and domestic beef in promotional efforts.  The producers, members of R-CALF and United Stockgrowers, filed suit against the USDA in May 2016 challenging the use of federally mandated funds to pay for speech with which the plaintiffs disagree.  Specifically, the plaintiffs claim that it violates their First Amendment rights when they are forced to pay into the MBC to support speech contrary to the plaintiffs’ beliefs.  They argue that the MBC should be able to use funds only if the producer paying the fee affirmatively authorizes use by the MBC.

The USDA filed a motion to dismiss the lawsuit, claiming that the plaintiffs failed to state an adequate claim.

Magistrate Judge’s Opinion

In December, a Federal Magistrate Judge for the District of Montana sided with the plaintiffs, and recommended that the District Court deny the USDA Motion to Dismiss.

First, the Magistrate found that the plaintiffs did have standing to bring the case, which essentially means they are the right people to bring the case because the issue at hand will have an impact on them.  The Magistrate rejected the USDA argument that the plaintiffs had to list the names of individual members bringing claims, finding that the declarations from sample members stating that they were forced to fund the MDC were sufficient.

Second, the Magistrate found that because the United States Supreme Court has previously held that compelling persons to fund a private message with which the individuals disagree violates the First Amendment, precisely what the plaintiffs allege is occurring in this case, they did state a valid legal claim.  The fact that the opt-out provision exists and allows producers to avoid funding the MBC was not determination at this point, as the Supreme Court has held in at least one other case that an opt-out provision does not automatically alleviate First Amendment concerns.

Third, the Magistrate rejected the UDSA’s request to postpone the case until ongoing federal rule-making regarding the opt-out provision is completed.  The USDA argued that because the rules for exactly how the opt-out provision will be utilized are still being created and the final rule could alleviate the plaintiffs’ concerns altogether, the court should not take the time and resources to consider this case now.  The Magistrate found that because the rule-making was ongoing indefinitely and there was no proposed timeline for it to conclude, this argument was rejected.

At this point, the Magistrate Judge’s ruling is only preliminary, and will be reviewed by the United States District Court Judge assigned to the case.  If upheld, the injunction will prevent the MBC from spending checkoff dollars on advertising, and the case would proceed to discovery and the remainder of the judicial process.