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Delano Farms Co. v. California Table Grape Commission

Supreme Court of California

May 24, 2018

DELANO FARMS COMPANY et al., Plaintiffs and Appellants,
v.
CALIFORNIA TABLE GRAPE COMMISSION, Defendant and Respondent.

          Superior Court Fresno County, Nos. 636636-3, 642546, 01CECG01127, 01CECG02292, 01CECG02289, 11CECG00178, Ct.App. 5 F067956 Donald S. Black Judge

          Brian C. Leighton; Sagaser, Watkins & Wieland, Howard A. Sagaser; Kirkland & Ellis, Michael W. McConnell and Danielle R. Sassoon for Plaintiffs and Appellants.

          Benbrook Law Group, Bradley A. Benbrook and Stephen M. Duvernay for The Cato Institute, Institute for Justice and Reason Foundation as Amici Curiae on behalf of Plaintiffs and Appellants.

          Jenner & Block, Rick Richmond, Jessica Ring Amunson and Samuel C. Birnbaum for DKT Liberty as Amicus Curiae on behalf of Plaintiffs and Appellants.

          Baker, Manock & Jensen, Robert D. Wilkinson; Wilmer Cutler Pickering Hale and Dorr, Seth P. Waxman, Brian M. Boynton, Thomas G. Saunders, Francesco Valentini, Ari Holtzblatt, Thomas G. Sprankling and Franceso Valentini for Defendant and Respondent.

          Kamala D. Harris, Attorney General, Janill L. Richards, Acting State Solicitor General, Mark J. Breckler, Chief Assistant Attorney General, Linda Gándara, Deputy State Solicitor General, Robert W. Byrne, Assistant Attorney General, Kathleen Vermazen Radez, Associate Deputy State Solicitor General, Randy L. Barrow and Ali A. Karaouni, Deputy Attorneys General, for California Department of Food and Agriculture as Amicus Curiae on behalf of Defendant and Respondent.

          CANTIL-SAKAUYE, C. J.

         Pursuant to the Ketchum Act (Food & Agr. Code, § 65500 et seq.; sometimes hereafter referred to as the Act), the activities of the California Table Grape Commission (sometimes hereafter referred to as the Commission) are funded by assessments on shipments of California table grapes. Plaintiffs and appellants are five growers and shippers of these grapes. They contend that the collection of assessments under the Act to subsidize promotional speech on behalf of California table grapes as a generic category violates their right to free speech under article I, section 2, subdivision (a) of the state Constitution (sometimes hereafter article I, section 2). Specifically, plaintiffs believe that the table grapes they grow and ship are exceptional, and cast the assessment scheme as infirm insofar as it requires them to sponsor a viewpoint (promoting all California table grapes equally) with which they disagree.

         The Commission responds that the Act's compelled-subsidy program does not violate article I, section 2 because the promotional messaging it underwrites represents government speech, as opposed to private speech. Both the Commission's position and that of plaintiffs recognize this court's prior determinations that a government program that compels market participants to subsidize generic promotional speech over their objections implicates article I, section 2 (Gerawan Farming, Inc. v. Lyons (2000) 24 Cal.4th 468, 509-510 (Gerawan I)) and is subject to intermediate scrutiny (Gerawan Farming, Inc. v. Kawamura (2004) 33 Cal.4th 1, 6 (Gerawan II)) - if these communications represent private speech. Gerawan II also indicated, however, that significantly more deference would be accorded to a compelled-subsidy scheme that funds only government speech. (Id., at pp. 26-28.) In Gerawan II, whether the challenged program produced government speech was left for development and determination on remand. (Id., at p. 28.) This proceeding picks up where Gerawan II left off, presenting the question whether promotional speech generated by a compelled-subsidy program amounts to government speech and for that reason avoids heightened scrutiny under article I, section 2.

         We conclude that the Commission's advertisements and related messaging represent government speech, and hold that the Ketchum Act's compelled-subsidy scheme does not violate plaintiffs' rights under article I, section 2. The government speech doctrine recognizes that a properly functioning government must express potentially controversial viewpoints as a matter of course, and that payers of taxes and fees may be required to subsidize this speech, even when they disagree with it, without implicating their constitutional right to free speech. Yet, as the United States Supreme Court recently cautioned, although “the government-speech doctrine is important - indeed, essential - it is a doctrine that is susceptible to dangerous misuse.” (Matal v. Tam (2017) 582 U.S. ___ [137 S.Ct. 1744');">137 S.Ct. 1744, 1758] (Matal).) Therefore, courts must take care in distinguishing government speech from private speech, and apply the government speech doctrine in a manner mindful of its potential impact on protected free speech interests.

         Here, the relevant circumstances establish sufficient government responsibility for and control over the messaging at issue for these communications to represent government speech that plaintiffs can be required to subsidize without implicating their rights under article I, section 2. Meanwhile, no triable issue of fact exists that the Ketchum Act violates plaintiffs' article I, section 2 rights under a different theory, such as one asserting that the statute's compelled-assessment scheme effectively prevents them from speaking. Accordingly, we hold that plaintiffs have advanced no viable claim under article I, section 2. Because the Court of Appeal rejected plaintiffs' challenge to the Ketchum Act on similar grounds, we affirm the judgment below.

         I. Factual and Procedural Background

         California leads the nation in the production of agricultural commodities, with its farms and ranches generating more than $47 billion in value in the 2015 crop year. (Cal. Dept. of Food and Agriculture, California Agricultural Statistics Review 2015-2016 (2017) pp. 1-2 (Agricultural Statistics Review).) Table grapes are among the agricultural products for which this state is well known. Table grapes are distinguished from other types of grapes, such as raisin grapes and wine grapes, in that they are generally eaten while fresh instead of being consumed only after being dried or turned into wine. (See Food & Agr. Code, § 65523.)[1] This opinion therefore sometimes refers to table grapes as “fresh grapes.” The 2015 harvest of California table grapes had an estimated total value in excess of $1.7 billion. (Agricultural Statistics Review, at p. 12.) The parties have stipulated that as of 2012, there were approximately 475 growers of table grapes in California.

         A. The Ketchum Act and Its Implementation

         The Ketchum Act responded to challenging market conditions encountered by the state's producers of fresh grapes in the 1960s.[2] As will be explained in more detail below, the Act created the California Table Grape Commission, a public corporation vested with the power and duty to engage in activities intended to increase consumer demand for California fresh grapes. These activities are funded by assessments imposed upon shippers of these grapes, which are passed along to their producers.

         1. Legislative Findings

         The Ketchum Act begins with a series of findings by the Legislature. Several of these findings concern the importance assigned to the production and marketing of California fresh grapes, and the challenges faced by growers of these grapes. These findings include, “[g]rapes produced in California for fresh... consumption comprise one of the major agricultural crops of California, and the production and marketing of such grapes affects the economy, welfare, standard of living and health of a large number of citizens residing in this state” (§ 65500, subd. (a)); and “[i]ncreased plantings of vineyards and improved cultural practices for the production of California grapes for fresh... consumption have increased and will continue to increase the production thereof and unless the fresh... consumption of California grapes is increased by the expansion of existing markets and the development of new markets, the interests of the fresh grape industry of California, and the public interest of the people of this state, will be adversely affected” (id., subd. (b)). Furthermore, the Legislature found that “[t]he inability of individual producers to maintain or expand present markets or to develop new or larger markets for such grapes results in an unreasonable and unnecessary economic waste of the agricultural wealth of this state” (id., subd. (c)); and “[s]uch conditions and the accompanying waste jeopardize the future continued production of adequate supplies of fresh grapes for human consumption for the people of this and other states, and prevent producers from obtaining a fair return for their labor, their farms and their production. As a consequence, the purchasing power of such producers has been in the past, and may continue to be in the future unless such conditions are remedied, low in relation to that of other people engaged in other gainful occupations within the state, and they are thereby prevented from maintaining a proper standard of living and from contributing their fair share to the support of the necessary governmental and education functions, thus tending to increase unfairly the tax burden of other citizens of the state” (id., subd. (d)).

         Other findings relate the state's response to these challenging conditions, endorsing measures perceived as developing and expanding markets for California fresh grapes. These findings provide, “The[] [aforementioned] conditions vitally concern the health, peace, safety and general welfare of the people of this state. It is therefore necessary and expedient in the public interest to protect and enhance the reputation of California fresh grapes for human consumption in intrastate, interstate and foreign markets, and to otherwise act so to eliminate unreasonable and unnecessary economic waste of the agricultural wealth of this state” (id., subd. (e)); “[t]he promotion of the sale of fresh grapes for human consumption by means of advertising, dissemination of information on the manner and means of production, and the care and effort required in the production of such grapes, the methods and care required in preparing and transporting such grapes to market, and the handling of the same in consuming markets, research respecting the health, food and dietetic value of California fresh grapes and the production, handling, transportation and marketing thereof, the dissemination of information respecting the results of such research, instruction of the wholesale and retail trade with respect to handling thereof, and the education and instruction of the general public with reference to the various varieties of California fresh grapes for human consumption, the time to use and consume each variety and the uses to which each variety should be put, the dietetic and health value thereof, all serve to increase the consumption thereof and to expand existing markets and create new markets for fresh grapes, and prevent agricultural waste, and [are] therefore in the interests of the welfare, public economy and health of the people of this state” (§ 65500, subd. (f)); “[i]t is hereby declared to be the policy of this state to aid producers of California fresh grapes in preventing economic waste in the marketing of their commodity, to develop more efficient and equitable methods in such marketing, and to aid such producers in restoring and maintaining their purchasing power at a more adequate, equitable and reasonable level” (id., subd. (g)); and “[t]he production and marketing of grapes produced in California for fresh human consumption is declared to be affected with a public interest;  the provisions of this chapter are enacted in the exercise of the police power of this state for the purpose of protecting the health, peace, safety and general welfare of the people of this state” (id., subd. (h)).

         2. The California Table Grape Commission

         The Act created the California Table Grape Commission to effectuate the policies set forth in the statute's findings. (§ 65550.)[3] The Commission is a public corporation. (§ 65551.) Its membership consists of three producers from each of the state's six operational fresh grape growing districts (§§ 65533, 65550, 65554), as well as one “public” member not engaged in the production, shipment, or processing of fresh grapes in this state (§ 65575.1). The Legislature has determined that the commissioners drawn from the state's producers “are intended to represent and further the interest of a particular agricultural industry concerned, and that such representation and furtherance is intended to serve the public interest.” (§ 65576.) The public member “shall represent the interests of the general public in all matters coming before the commission.” (§ 65575.2.)

         After the Commission's inception and initial elections, producers have been selected for service on the Commission through a two-part process. First, each year each district conducts an election in which the district's qualified grape producers cast votes. (§ 65556.) The Secretary of the Department of Food and Agriculture then tabulates these votes, identifies the two leading vote-getters, and appoints one of these two nominees as a member of the Commission. (§ 65563.) The public member of the commission, meanwhile, is selected by the Secretary from a list of three nominees proposed by the Commission. (§ 65575.1.) If the Secretary disapproves of all nominees for the public member position, “the [C]ommission shall continue to submit lists of nominees until the [Secretary] has made a selection.” (Ibid.) Each commissioner serves a three-year term. (§ 65555.)

         3. The Commission's Powers and Duties

         The Ketchum Act confers upon the Commission “powers and duties” (§ 65572) that include responsibility to “administer and enforce [the Act], and to do and perform all acts and exercise all powers incidental to or in connection with or deemed reasonably necessary, proper or advisable to effectuate the purposes of” the Act. (§ 65572, subd. (c).) The Commission may hire officers and other personnel to assist with these responsibilities. (Id., subd. (d).)[4] The Act specifically vests the Commission with the “power[] and dut[y]... [¶]... [¶]... [t]o promote the sale of fresh grapes by advertising and other similar means for the purpose of maintaining and expanding present markets and creating new and larger intrastate, interstate, and foreign markets for fresh grapes; to educate and instruct the public with respect to fresh grapes; and the uses and time to use the several varieties, and the healthful properties and dietetic value of fresh grapes.” (§ 65772, subd. (h).) In the Commission's discretion, it also may “educate and instruct the wholesale and retail trade with respect to proper methods of handling and selling fresh grapes;... arrange for the performance of dealer service work providing display and other promotional materials;... make market surveys and analyses; and... present facts to and negotiate with state, federal and foreign agencies on matters which affect the marketing and distribution of fresh grapes; and... undertake any other similar activities which the [C]ommission may determine appropriate for the maintenance and expansion of present markets and the creation of new and larger markets for fresh grapes.” (Id., subd. (i).) The Commission also is authorized to “conduct, and contract with others to conduct, scientific research... respecting the marketing and distribution of fresh grapes, the production, storage, refrigeration, inspection and transportation thereof, to develop and discover the dietetic value of fresh grapes and to develop and expand markets, and to improve cultural practices and product handling so that the various varieties may be placed in the hands of the ultimate consumer in the best possible condition.” (Id., subd. (k).) These and other provisions of the Act are to be “liberally construed.” (§ 65674.)

         To pay for the Commission's activities, the Act authorizes an assessment on shipments of fresh grapes. This assessment is set annually by the Commission, but by statute may not exceed.6522 cents per pound of shipped grapes. (§§ 65572, subd. (l), 65600.) These assessments are paid to the Commission by shippers, each of which is in turn authorized to collect the assessments from the responsible producers. (§§ 65604, 65605.) In the event of nonpayment of an assessment, or if the Commission believes a violation of the Act, or any rule or regulation promulgated under the Act, has occurred, it may bring an action in its name for collection, civil penalties, or injunctive relief. (§ 65650.) Violations of the Act, including a shipper's refusal to supply the Commission with certain information regarding its supplier or suppliers of grapes, are punishable as misdemeanors. (§ 65653.) The Act provides that “[t]he State of California shall not be liable for the acts of the [C]ommission or its contracts.” (§ 65571.)

         The Commission assumed its responsibilities under the Ketchum Act only after a referendum among producers. (§ 65573.) The Commission's operations may be suspended through a similar process. If 11 members of the Commission make a finding that the Act “has not tended to effectuate its declared purposes, ” or 20 percent of producers file a petition with the Secretary requesting suspension of the Commission's activities, the Secretary shall cause a producer referendum to be conducted. (§ 65660.) If a sufficient number of producers participate in this referendum and vote for suspension, “the [Secretary] shall declare the operation of the provisions of [the Act] and of the [C]ommission suspended, effective upon expiration of the marketing season then current.” (§ 65661.) Furthermore, the Act provides for a referendum among producers every five years to determine whether the Commission's operations will continue. (§ 65675.) To date, all of these referenda have led to the continuation of the Commission and its operations.

         4. The Commission's Activities Under the Act

         The Commission divides its activities into five general categories - research, trade management, issues management, advertising, and education and outreach.[5] Since the Commission's inception, its programmatic efforts have included facilitating the opening of new international markets for California table grapes, funding and implementing research efforts to produce new varieties of table grapes and develop improved pest-control practices, promoting the use of table grapes among food service providers and in home cooking, collaborating with retailers to enhance the presentation and sale of fresh grapes to consumers, and developing generic advertising that promotes the consumption of California fresh grapes.

         The Commission's advertising appears in print media and on radio, television, and the Internet. This advertising does not specify or endorse any one type of California fresh grape or any single producer of these grapes. Instead, it promotes California fresh grapes in general as being flavorful, convenient, and healthful. The Commission's advertising has not promoted any products other than California fresh grapes. Past themes of Commission advertising have borne the taglines, “Good things come in bunches, ” “Share some California grapes, ” “Life is complicated. Grapes are simple, ” and “California grapes. The Natural Snack.” These advertisements bear no express attribution to the State of California. Their recurring elements vary across media. Print advertisements include the Commission's website address and its logo, which reads “Grapes from California.”

         5. Oversight of the Commission

         By all accounts, neither the Secretary nor her employees have directly participated in the development or approval of the Commission's advertising, or other promotional speech by the Commission. The Department of Food and Agriculture's “Policies for Marketing Programs” manual, the pertinent provisions of which are not captured in any promulgated regulation, states that the “CDFA reserves the right to exercise exceptional review of advertising and promotion messages wherever it deems such review is warranted, ” which “may include intervention in message development prior to placement of messages in a commercial medium or venue.” This manual also relates the Department's expectation that advertising and promotional messages be “[t]ruthful, ” “[i]n good taste, ” “[n]ot disparaging, ” and “[c]onsistent with statute.”

         The Ketchum Act incorporates a mechanism to challenge Commission actions, providing that “[a]ny person aggrieved by any action of the [C]ommission” may appeal that action to the Secretary. (§ 65650.5.)[6] The Secretary “shall review the record of the proceedings before the [C]ommission.” (Ibid.) Upon such review, the Secretary shall dismiss the appeal if she finds that the Commission's action “was not an abuse of discretion or illegal, ” but may reverse the Commission's action if it was “not substantially sustained by the record, was an abuse of discretion, or illegal.” (Ibid.) Any decision by the Secretary dismissing an appeal or reversing an action of the Commission is subject to judicial review upon petition of the Commission “or any party aggrieved by the decision.” (Ibid.) This appeal mechanism has been invoked in the past, leading to the Secretary's reversal of a Commission action, albeit not in the context of advertising or other promotional speech.

         As another form of oversight, the Act provides that the Commission must “keep accurate books, records and accounts of all of its dealings, ” which “shall be open to inspection and audit by the Department of Finance... or other state officer charged with the audit of operation of departments of the State of California.” (§ 65572, subd. (f).)

         B. Proceedings Below

         In 1999, plaintiffs Delano Farms Company (Delano Farms) and Gerawan Farming, Inc., filed separate but substantively similar complaints in Sacramento Superior Court, in which they alleged (among other claims) that the Ketchum Act's compelled-subsidy program violates their right to free speech under article I, section 2.[7] Plaintiffs Four Star Fruit, Inc., Bidart Bros., and Blanc Vineyards, LLC (Blanc Vineyards) have since joined the litigation, raising similar claims.

         All plaintiffs assert that the Ketchum Act is unconstitutional insofar as it requires them to subsidize promotional speech that advances a viewpoint with which they disagree. Delano Farms and Blanc Vineyards, for example, each allege that “[t]he Commission's advertisements, promotions, and other expressive activities are largely designed to promote table grapes as though they were a generic commodity with generic quality, ” whereas these plaintiffs “promote and market their own brands and labels of table grapes to distinguish to [their] buyers [their] product[s], grade, quality and [their] service from that of [their] competitors in order to secure a higher price and repeat business.” The other plaintiffs make analogous allegations. Plaintiffs also claim that a conflict exists between the Commission's messaging regarding fresh grapes and the message that plaintiffs support. Delano Farms and Blanc Vineyards assert that “[t]he generic advertising and promotion activities engaged in by the Commission [are] not at all helpful to [p]laintiffs and [are] indeed harmful to [p]laintiffs' message which is to buy [p]laintiffs' table grapes because they are better, a better consumer value, and that [p]laintiffs provide better service.” All plaintiffs seek declaratory and injunctive relief, as well as a refund of the assessments they have paid.

         After the expiration of lengthy stays pending the resolution of related litigation, [8] the Commission moved for summary judgment in 2012. In doing so, the Commission argued that the advertisements and other communications subsidized through the Ketchum Act represent government speech that plaintiffs could be required to subsidize without violating their right to free speech under article I, section 2. The Commission advanced two rationales for treating its messaging as government speech. First, it cast itself as a government agency capable of generating government speech on its own. Second, the Commission asserted that even if it was not itself a government speaker, its communications qualified as government speech because they are effectively controlled by the government. As an alternative ground for summary judgment, the Commission argued that if its advertising and other speech did not represent government speech, the Act's compelled assessment program nevertheless survived intermediate scrutiny.

         The superior court granted the Commission's motion for summary judgment, reasoning that the Commission represents a government agency for purposes of the government speech doctrine. Providing an additional basis for its holding, the court determined that the Act's compelled-subsidy program directly advances a substantial government interest and is not more extensive than necessary to serve that interest, and therefore withstands intermediate scrutiny.

         When plaintiffs appealed, the Court of Appeal affirmed. The Court of Appeal determined, first, that article I, section 2 does not demand a more constrained construction of the government speech doctrine than the one adopted by the United States Supreme Court in Johanns v. Livestock Marketing Assn. (2005) 544 U.S. 550 (Johanns) as a matter of federal law. The Court of Appeal then reviewed pertinent provisions of the Ketchum Act and concluded therefrom “that the Commission's promotional activities are effectively controlled by the state and therefore are government speech.” This conclusion, the Court of Appeal reasoned, meant that the Commission's promotional activities are “immune to challenge under the California Constitution.”

         We granted review.

         II. Discussion

         This is not the first time this court has considered the relationship between article I, section 2 and the compelled subsidy of speech. Through our previous encounters with this subject, we have concluded that a standard of intermediate scrutiny applies under article I, section 2 when the government compels the subsidization of private speech. (Gerawan II, supra, 33 Cal.4th at p. 6.) We also have indicated that greater deference would be accorded to state action that subsidizes only government speech. (Id., at pp. 26-28.) We have not yet determined for ourselves, however, whether a particular compelled-subsidy program in fact generates government speech under article I, section 2.

         This case presents that issue, requiring us to decide whether speech developed and promulgated under the auspices of the Ketchum Act represents government speech. According to plaintiffs, the Commission - being overwhelmingly populated by market participants, each of whom is appointed by the Secretary from a pair of nominees proposed by growers themselves - is essentially a private entity incapable of generating government speech on its own. Plaintiffs also assert that the Ketchum Act does not otherwise ensure sufficient governmental accountability to the public regarding the messaging it contemplates for these communications to qualify as government speech. Here, plaintiffs emphasize the absence of active engagement by the CDFA in the review and approval of the Commission's promotional speech, and the fact that the Commission's advertisements are not explicitly attributed to the state. For its part, the Commission maintains that it is a state agency capable of generating government speech, even without oversight by the CDFA or other government actors. Furthermore, the Commission adds, the extent of governmental control over the messaging promulgated under the Ketchum Act also leads to a finding that these communications represent government speech.

         In evaluating these positions, we begin with an overview of two principles this case calls upon us to mediate: the free speech guarantee enshrined in article I, section 2, and the government speech doctrine. We then review a series of decisions in which this and other courts have evaluated assertions that compelled-subsidy programs do not implicate constitutional free speech protections because they subsidize only government speech. Applying principles gleaned from the relevant precedent to the communications authorized by the Ketchum Act, we conclude that the promotional messaging under the Act constitutes government speech.

         A. Article I, Section 2

         Article I, section 2 of the California Constitution contains our state's counterpart to the free speech provision found in the First Amendment to the United States Constitution. Article I, section 2, subdivision (a) declares, “Every person may freely speak, write and publish his or her sentiments on all subjects, being responsible for ...


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