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California FMMO taking a detour through Supreme Court

Progressive Dairyman Editor Dave Natzke Published on 06 February 2018
Supreme Court

Proponents of California’s entry into the Federal Milk Marketing Order system (FMMO) received an unforeseen delay when the USDA announced it would wait for a U.S. Supreme Court ruling regarding administrative law judges before moving forward.

In a notice published in the Federal Register on Feb. 6, the USDA said it would delay action on the California FMMO until the Supreme Court rules on Lucia v. Securities and Exchange Commission.

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How this impacts the creation of a California FMMO may take a short civics lesson. Without diving too far into legalese, the case before the U.S. Supreme Court deals with an administrative law judge (ALJ) who was granted some decision-making authority by the Securities and Exchange Commission (SEC) in a lawsuit involving alleged investment fraud. Attorneys for the defendant argued initial sanctions imposed by the ALJ and ordered by the SEC were unconstitutional – because the ALJ’s appointment was unconstitutional.

Under the “Appointments Clause” of Article II of the Constitution, people serving in some government positions must be nominated and receive consent before being appointed. Others may simply be appointed. Where that line is drawn, and where ALJs fit in the picture, is subject to debate.

The U.S. Court of Appeals for the District of Columbia rejected claims made by the defendant regarding the ALJ’s appointment, holding that ALJs are not “officers” required to follow the Appointments Clause, and legal arguments headed toward a higher level. On Nov. 29, the U.S. Solicitor General, the person appointed to represent the federal government before the Supreme Court, submitted a legal brief on behalf of the Trump administration, taking the position that ALJs were officers of the U.S. government, subject to the Appointments Clause.

On Jan. 12, the Supreme Court agreed to hear the case, and oral arguments before the court are likely in April. According to Annie AcMoody, director of economic analysis with Western United Dairymen, a ruling on the challenge is not likely until the end of June.

The ruling could have ramifications throughout federal agencies using ALJs, including USDA’s handling of the California FMMO. Like the SEC, the USDA is an independent agency of the U.S. federal government.

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Some legal analysts suggest the ruling will not only impact appointments of ALJs, but also, by extension, the administrative hearings they oversee, perhaps retroactively. So, in broad terms, the case could determine whether USDA’s use of an ALJ during the California FMMO rulemaking hearing process was also legal.

According to a USDA spokesperson, the USDA viewed ALJ Jill S. Clifton as an employee of USDA at the time of a hearing on the California FMMO, with her appointment completed in accordance with agency procedures and not subject to the nomination and approval processes outlined in the Appointments Clause. However, the Lucia case now calls that into question.

“Consequently, it is prudent and appropriate for AMS to delay further proceedings in this FMMO rulemaking until the Court renders its decision in Lucia,” according to the Federal Register notice.

Clifton presided over a 40-day public hearing, held September-November 2015, to take testimony and gather evidence the USDA would use to either propose or deny creation of a California FMMO.

On Feb. 14, 2017, AMS published a “recommended decision” saying the California FMMO was warranted and would provide more orderly milk marketing conditions. (Read: Decision time: USDA ‘recommends’ California join FMMO.) That kicked off another public comment period and further review by USDA. It was widely anticipated USDA would announce a “final decision” in early 2018, sending a proposed California FMMO to a producer referendum.

The USDA’s decision to delay further action while it awaits the Supreme Court ruling came almost three years to the day that dairy cooperatives California Dairies Inc., Dairy Farmers of America and Land O’Lakes first proposed a California FMMO. With the process now entering its fourth year, the additional delay is frustrating for some California dairy leaders.

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“Considering that this process began more than three years ago, we are disappointed with this most recent delay by the USDA,” said Dennis Rodenbaugh, senior vice president and chief operating officer of Dairy Farmers of America’s Western Fluid Group. “Milk producers in California deserve the right to decide if a federal order is right for them and to conduct an up or down vote in a timely manner. Bottom line: The industry needs a decision so it can move forward one way or another.”

“The state of California has been losing dairy farms and milk production at an alarming rate these past few years,” said Western United Dairymen’s AcMoody. “We need USDA to release the Final Decision on a Federal Milk Marketing Order and put its fate into the hands of producers who are suffering under the uncertainty the delay in this process is creating.”

Geoff Vanden Heuvel, California Milk Producers Council (MPC) board member and economics consultant, expressed disappointment in the USDA’s announcement.

He said ALJ Clifton was explicit in describing herself as an employee of USDA during the California hearing process, with the sole responsibility of collecting testimony and gathering evidence.

According to a USDA spokesperson, Clifton “acted within the bounds of the regulations” – ruling on motions and requests, administering oaths to witnesses, examining witnesses, admitting and excluding evidence, and overseeing the general conduct of the hearing, among other duties covered by regulation. The evidence was certified and submitted to the AMS administrator for use in determining a recommended decision regarding a California FMMO.

Vanden Heuvel questioned whether an adverse Supreme Court ruling – determining Clifton required the more extensive appointment process – would invalidate the 40 days of testimony and more than 8,000 pages of evidence collected regarding the establishment of a California FMMO.

California dairy co-op leaders were reviewing potential strategies, Vanden Heuvel said. He insisted dairy groups would share their opinions with U.S. Ag Secretary Sonny Perdue, who was scheduled to attend World Ag Expo, Feb. 13-15, in Tulare, California. Perdue will participate in a town hall meeting, Feb. 13, 10:30 a.m., in the Heritage Complex Banquet Hall, on the expo grounds. Seating is limited.

Thoughts the California FMMO would advance early this year was, in part, a piece of the California Department of Food and Agriculture’s recent decision to deny a public hearing to consider temporary emergency increases in minimum milk prices paid to dairy farmers. (Read: “CDFA denies milk price hike hearing request” in Progressive Dairyman’s Weekly Digest.)  end mark

PHOTO: California’s entry into the Federal Milk Marketing Order system received an unforeseen delay and a side trip through the U.S. Supreme Court. Photo by Getty Images. 

Dave Natzke
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