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Litigation Alert: Industry-Funded Government Ads Are Immune From First Amendment "Forced Speech" Attack

Date: Dec 02, 2009

    After 13 years of litigation, including two appeals, the Ninth Circuit has ruled that the advertising and other promotional activities of a California commodity commission constitute government speech and are therefore immune from First Amendment challenge by members of the industry who are forced to pay for the promotions. Delano Farms Co. et al. v. California Table Grape Commission, No. 08-16233 (Nov. 20, 2009).

BRIEF SUMMARY

    California growers of table grapes are required to pay assessments for generic promotions of their products as healthier snacks by the California Table Grape Commission. A group of these growers alleged that the Commission was wasting their money, harmfully promoting all table grapes as of equal quality, and siphoning off funds that they could spend on more effective promotions. A principal contention of the Plaintiffs was that the state assessment scheme violated their First Amendment right to speak for themselves and not be forced to speak by having to pay for messages and expenses they did not want.

    The Ninth Circuit rejected this argument, finding that the promotions were "government speech," which is immune from First Amendment attack, because the Commission is a governmental entity. Alternatively, the appeals court found that the promotions were government speech because the state effectively controlled those activities.

FACTS

    In 1967, noting the inability of individual producers to maintain or expand present markets or to develop new or larger markets for table grapes, the California Legislature passed the Ketchum Act, Cal. Food & Agric. Code §§ 65500 et seq., which created the Commission. The Commission was tasked with supporting the table grape industry through centralized advertising, marketing, research and government relations efforts. The Commission is funded primarily by hefty annual assessments ($600,000) imposed on growers who ship California table grapes. Its advertising focuses on the idea of grapes as a healthy snack as compared to other snack options such as ice cream, chips, French fries, and buttered popcorn, but does not mention any product or company individually.

    In 1996, three assessed companies filed this suit, alleging that their First Amendment rights were violated by their "being compelled by state law to pay money for generic advertising campaigns." They lost at the trial level, but the Ninth Circuit reversed and remanded under then-current Supreme Court precedent, finding that the growers were "entitled to First Amendment protection against state compulsion to fund generic advertising."

    During remand, two significant things happened: The Supreme Court handed down a decision finding that promotions under a similar scheme for beef were government speech, which is not susceptible to First Amendment challenge, Johanns v. Livestock Marketing Association, 544 U.S. 550 (2005), and the Commission amended its answer to assert that its promotional activities were government speech. This time, the district court granted summary judgment to the Commission, finding that its activities were protected government speech. The growers appealed.

DECISION

    The Ninth Circuit held that the Commission's promotional activities are protected government speech in either of two ways: (1) the Commission itself is a government entity, which makes the table grape promotions government speech, and/or (2) the Commission's messages are "effectively controlled" by the State, which makes them government speech.

As a Government Entity, the Commission's Speech Is Not Subject to the First Amendment.

    To reach this conclusion, the court analyzed Keller v. State Bar of California, 496 U.S. 1 (1990), in which the Supreme Court held that the State Bar of California was not a government actor for First Amendment purposes, and Lebron v. National Railroad Passenger Corp., 513 U.S. 374 (1995), in which the Court held that Amtrak was a government entity and, therefore, was immune from a First Amendment challenge.

    The Ninth Circuit likened the Commission to Amtrak, a corporation established by Congress for public convenience and necessity and over which the President had the power to appoint the majority of the members of the board. Similarly, the Commission had been created by the California Legislature, through the explicit use of the State's police power to protect health and safety. As a state corporation, it had the express purpose of furthering the governmental objectives of addressing the unreasonable and unnecessary economic waste of the agricultural wealth of California. As did the President in Lebron, the Secretary of the California Department of Food and Agriculture had the power not only to appoint all the commissioners. Indeed, the state Secretary also was empowered to remove commissioners, a power that the President does not have over Amtrak.

    The Ninth Circuit therefore held that, were it to decide the case solely on the question of whether the Commission was a government entity, it would classify the Commission so and hold it immune from First Amendment Challenge.

The Commission's Message Is Effectively Controlled by the State, Therefore Not Subject to First Amendment Attack.

    In the alternative, the Ninth Circuit held that the Commission's message was "effectively controlled" by state government and, therefore, not constrained by the First Amendment. Relying this time on Johanns and its own precedent, Paramount Land Co. LP v. California Pistachio Commission, 491 F.3d 1003 (9th Cir. 2007), the court held that three key factors weighed in favor of finding the Commission so controlled.

    First, the Commission was established by the California legislature to enhance the image of the state's products. Second, the legislature had provided an overriding directive for the types of messages the Commission should promote and had declared quite specifically the topics and messages that the Commission's advertising and marketing efforts should focus upon. Third, the legislation gave the Secretary substantial oversight and control of the Commission and its activities, including power to nominate and remove commissioners and the ability to review the Commission's records and accounts.

The Concurrence: Wave of the Future?

    In a concise, single-paragraph concurrence, Judge Reinhard flagged what may be the wave of the future for government speech and advertising cases. Put simply, Judge Reinhardt found that the court's two-part analysis was unnecessary – since the Commission was a government entity, its speech was, ipso facto, government speech, outside the bounds of the First Amendment. There should be no need to enter into the complicated analysis of whether the Commission's message was "effectively controlled" by the state, he asserted.

For more information, please contact Richard Leighton at 202-434-4220 or leighton@khlaw.com.