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Trade court to take up cotton checkoff lawsuits

Supporters of the cotton checkoff may get their day in court sooner rather than later now that the U.S. Supreme Court has reversed lower court rulings that both the beef and pork promotion programs were unconstitutional.

U.S. importers of textile and apparel products have filed more than 100 lawsuits claiming the mandatory checkoff in the Cotton Research and Promotion Act violated their right of free speech. A judge with the U.S. Court of International Trade in New York put those on hold until the Supreme Court ruled on the beef promotion program.

“It's my understanding that the Court of International Trade said it would restart the proceedings in the importer lawsuits within 30 days of the Supreme Court ruling,” said William P. Crawford, president and CEO of the Cotton Board, the Memphis, Tenn.-based organization that oversees the funding and operation of the cotton research and promotion program.

“That should mean that the clock will start running again shortly.”

Crawford said he couldn't predict the outcome once the Court of International Trade resumes hearings in the importer case, but “you would think that the CIT has to factor the Supreme Court's ruling in the beef case into its decision-making process.”

Members of the Livestock Marketing Association, a Nebraska-based producer group, sued USDA in district court, claiming they were being forced to support a program whose message they did not agree with. The $1-per-head checkoff provides funding for a number of industry promotional efforts such as the “Beef: It's what's for dinner” campaign.

Six justices on the Supreme Court agreed with the majority opinion that the beef promotion program was exempt from First Amendment scrutiny because it constitutes “government speech.”

“The message set out in the beef promotions is from beginning to end the message established by the federal government itself,” said Justice Antonin Scalia, writing in the majority opinion.

“When, as here, the government sets the overall message to be communicated and approves every word that is disseminated, it is not precluded from relying on the government-speech doctrine merely because it solicits assistance from nongovernmental sources in developing specific messages.”

That decision was handed down May 23. A week later, the Supreme Court set aside a lower court ruling declaring the pork checkoff unconstitutional and returned the case to the Sixth Circuit Court of Appeals in Cincinnati with instructions to reconsider the case in light of its ruling in the beef checkoff.

Most of the lawsuits against the cotton research and promotion program also rely on the First Amendment issue, according to Crawford.

“More than 100 importers filed lawsuits based on the freedom of speech argument,” he said. “One importer filed an administration case with USDA, but all of the cases are similar, i.e., the checkoff program is unconstitutional based on the First Amendment.”

One of the attorneys in the lawsuits filed with the Court of International Trade has requested class action status, but that has not been decided,” said Crawford. The lone case filed with USDA is a procedural matter.

“In our enabling legislation, any legal action has to start at the administrative level,” said Crawford. “The lead attorney in this one case is a former general counsel at USDA, and he believes he is following procedures by starting with USDA.”

While the cases have some similarities with the legal challenges to the beef and pork checkoffs, there are differences, he said.

“In the beef case, you had disgruntled producers and feedlot operations,” he notes. “In our case, only importers have filed actions. We haven't heard of a producer who has intimated he was opposed to the checkoff program.”

“Few can question the phenomenal success the cotton research and promotion program has had at revitalizing consumer demand for our fiber,” said Kent Nix, chairman of the Cotton Board and a cotton producer from La Mesa, Texas. “That demand is evident and reflected by the increase in consumer preference for all cotton products — imported cotton products as well.”

For years, only cotton producers contributed to the cotton research and promotion program. But as imported products began to take a greater share of the U.S. textile and apparel market, producers began pressing to require importers to help support efforts to promote the products.

With the contributions from importers, the cotton checkoff now generates about $60 million per year, which is spent on research, and promotion activities conducted by Cotton Incorporated.

“This program has helped the bottom line of every cotton producer in the United States, and it also generates positive returns for the entire cotton-apparel production chain,” said Woods Eastland, cotton marketing executive and chairman of the National Cotton Council.

Despite the lawsuits, Crawford said he believes more importers are beginning to realize the value of promoting cotton-based textile and apparel products through the checkoff program.

“In some quarters, the importers are very much opposed to the checkoff, but, in the last several years, we have made some good strides, particularly with some of the newer members of the industry,” he said. “I have to say that none of our current board members from the importer sector are involved in any of the lawsuits.”

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