No. 00-276 

In the Supreme Court of the United States 

UNITED STATES OF AMERICA AND 

UNITED STATES DEPARTMENT OF AGRICULTURE, 
PETITIONERS 

v. 

UNITED FOODS, INC. 

ON WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE SIXTH CIRCUIT 

JOINT APPENDIX 

BARBARA D. UNDERWOOD 

Acting Solicitor General 

Department of Justice 
Washington, D.C. 20530-0001 
(202) 514-2217 

Counsel of Record 
for Petitioners 
LAURENCE H. TRIBE 

Hauser Hall 420 
1575 Massachusetts Avenue 
Cambridge, MA 02138 
(617) 495-4621 

Counsel of Record 
for Respondent 

PETITION FOR WRIT OF CERTIORARI FILED: AUGUST 18, 2000 
CERTIORARI GRANTED: NOVEMBER 27, 2000 

UNITED STATES DISTRICT COURT 
WESTERN DISTRICT OF TENNESSEE (JACKSON) 

Civil No. 96-CV-1252 

UNITED STATES 

v. 

UNITED FOODS, INC. 

DOCKET ENTRIES 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

10/16/96 1 COMPLAINT (Summons(es) 
issued) (gn) [Entry date 
10/17/96] [1:96cv1252] 

11/6/96 2 

MOTION by USA for sum- 
mary judgment or, in the al- 
ternative, for a preliminary 
injunction - CJT wpo (pb) 
[1:96cv1252] 

(1) 

2 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

11/6/96 3 

MEMORANDUM by USA in 

support of motion for sum- 
mary judgment (2-1), of mo- 
tion for a preliminary in- 
junction [2-2] w/attmts: dec- 
laration of Wade Whitfield; 
report; cpy of check - CJT (pb) 
[1:96cv1252] 

11/29/96 4 NOTICE OF FILING OF 

WAIVER OF SERVICE OF 
SUMMONS by defendant 
United Foods, Inc. w/attd 
waiver - CJT (pb) [Entry date 
12/02/96] [1:96cv1252] 

1/14/97 5 ANSWER by defendant 

United Foods, Inc. to cmplt [l- 
1] - CJT (pb) [1:96cv1252] 

1/14/97 6 

MOTION by defendant to stay 

proceedings w/attmt: COA 
decision, 9th Cir. - CJT (pb) 
[1:96cv1252] 

1/14/97 7 

MOTION by defendant to file 

a memorandum in excess of 
page limitation - CJT wpo (pb) 
[1:96cv1252] 

3 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

1/14/97 8 

RESPONSE by defendant to 

motion for summary judgment 
[2-1], to motion for a pre- 
liminary injunction [2-2] - CJT 
(pb) [1:96cv1252] 

1/14/97 9 

BRIEF IN OPPOSITION by 

defendant regarding motion 
for sum jgm [2-l], regarding 
motion for prel inj [2-2] - CJT 
(pb) [1:96cv1252] 

1/14/97 9 BRIEF by defendant in 
support of motion to stay [6-1] 
- CJT (pb) [1:96cv1252] 

1/14/97 10 DECLARATION by defendant 
in support of dft’s opposition 
[9-l] to plt’s motion for sum 
jgm or, in the alternative, for 
prel inj w/attd Exhs: 1. 
United Food’s administrative 
peition; 2. Admin Law Judge 
decision; 3. ALJ’s decision 
on respondent’s motion for 
reconsideration; 4. excerpts 
from transcript of Mills hear- 
ing; 5. ALJ’s “Summary of 
Telephone Conference” - CJT 
(pb) [1:96cv1252] 

4 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

1/14/97 11 SETTING LETTER: schedul- 
ing conference set for 2/13/97 
at 11:00 before MagJBreen 
Rm 320 Fed Bldg Jackson 
(bph) [1:96cv1252] 

1/29/97 12 SETTING LETTER: schedul- 
ing conference reset for 
2/24/97 at 9:30 before Mag J 
Breen (bph) [Entry date 
01/30/97] [1:96cv1252] 

2/6/97 13 

ORDER by Judge James D. 

Todd granting motion to file a 
memorandum in excess of 
page limitation [7-1] - CJT (cc: 
all counsel) (pb) [Entry date 
02/07/97] [1:96cv1252] 

2/11/97 14 

ORDER by Judge James D. 

Todd granting dft United 
Foods motion to stay pro- 
ceedings [6-1], CASE STAYED 

(cc: all counsel) (skp) 
[1:96cv1252] 

5 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

2/14/97 15 

REPLY by USA to response 

to motion for summary judg- 
ment [2-1], motion for a pre- 
liminary injunction [2-2] 
w/attmts: A. opinion/order 

USDC WD/MI; B. summary of 
teleconference—stay order; C. 
transcript; D. USDA report re 
mushrooms - CJT (pb) 
[1:96cv1252] 

3/7/97 16 MEMORANDUM by plaintiff 
in support of plt’s motion for 
reconsideration of stay order - 
CJT wpo (pb) [1:96cv1252] 

3/18/97 17 
RESPONSE TO THE MOTION 

FOR RECONSIDERATION 

by defendant - CJT (pb) 
[1:96cv1252] 

3/20/97 18 ORDER DENYING MOTION 

FOR RECONSIDERATION by 
Judge James D. Todd re 
Memorandum in support of 
Plaintiff ’s Motion for Recon- 
sideration of Stay Order[16-1] 
(cc: all counsel)CJT (bph) 
[1:96cv1252] 

6 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

2/17/98 19 

ORDER by Judge James D. 

Todd stay lifted and granting 
addtnl time to file supplmtl 
memoranda. The court here- 
by allows the United States 
an addtnl twenty (20) days in 
which to file a supplmtl memo 
in support of USA’s motion 
for sum jgm, or in the alteran- 
tive [sic] for prel inj. United 
Foods will then have twenty 
(20) days in which to respond - 
CJT (cc: all counsel) (pb) 
[Entry date 02/ 18/ 98] 
[1:96cv1252] 

3/23/98 20 

MOTION by defendant to con- 
solidate cases w/Exh: A. cmplt 
in action 98-1082 - CJT (pb) 
[1:96cv1252] 

3/27/98 21 MOTION by defendant 

United Foods, Inc. for attor- 
ney Bradley A. MacLean to 
appear pro hac vice w/cert of 
good standing - CJT wpo (pb) 
[Entry date 03/30/98] [Edit 
date 03/30/98] [1:96cv1252] 

7 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

3/27/98 22 

PRO HAC VICE FEE PAID: in 

the amount of $10.00 receipt 
# 19095 by Farris, Warfield 
& Kanaday on behalf of 
atty Bradley A. MacLean 
(pb) [Entry date 03/30/98] 
[1:96cv1252] 

3/27/98 23 

ORDER by Judge James D. 

Todd granting motion for 
attorney Bradley A. MacLean 
to appear pro hac vice [21-1] - 
CJT (cc: all counsel) (pb) 
[Entry date 03/ 30/ 98] 
[1:96cv1252] 

4/17/98 24 

ORDER by Judge James D. 

Todd granting motion to 
consolidate cases [20-1] 1:96- 
cv-1252 with member cases 
1:98-cv-1082 - CJT (cc: all 
counsel) (pb) [Entry date 
04/20/98] 

5/12/98 25 ATTORNEY APPEARANCE 

for USA by atty Pamela J. 
Aronson (recd fr Mphs) - CJT 
(pb) [Entry date 05/15/98] 
[1:96cv1252] 

8 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

5/21/98 26 
MOTION by govt dft AGRI 

(US Dept of Agriculture) 
in 1:98-cv-01082 to dismiss, or, 
in the alterntive [sic], for sum- 
mary judgment - CJT (pb) 
[Entry date 05/22/98] [1:96cv 
1252 1:98cv1082] 

5/21/98 27 MEMORANDUM by govt dft 

AGRI (US Dept of Agri- 
culture) in 1:98-cv-01082 in 
support of motion to dismiss 
[26-1] in 1:98-cv-01082, of mo- 
tion for summary judgment 
[26-2]in 1:98-cv-01082 w/Exhs: 
1-2. USDC memorandum 
opinion/orders; 3. order; 4. 
program announcement; 5. 

USDA petition; 6. USDA 

decision/order of dismissal; 7. 
USDA decision/order - CJT 
(pb) [Entry date 05/22/98] 
[1:96cv1252 1:98cv1082] 

9 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

6/19/98 28 

MOTION by defendant United 

Foods, Inc. in 1:96-cv-01252, 
plaintiff United Foods, Inc. in 
1:98-cv-01082 to extend time 
to file resp to the govt’s 
motion to dism - CJT wpo 
(pb)[Entry date 06/22/98] 
[1:96cv1252 1:98cv1082] 

6/22/98 29 

ORDER by Judge James D. 

Todd granting motion to 
extend time to file resp to 
the govt’s motion to dism [28- 

1] in 1:96-cv-01252, 1:98-cv- 
01082 - CJT (cc: all counsel) 
(pb) [Entry date 06/23/98] 
[1:96cv1252 1:98cv1082] 

7/9/98 31 RESPONSE by defendant 

United Foods, Inc. to motion 
to dismiss [26-1] - CJT (pb) 
[Entry date 07/ 13/ 98] 
[1:96cv1252] 

7/9/98 32 AFFIDAVIT of Donald 

Dresser w/Exh: A. Mushroom 
Council 1997 Management 
Report - CJT (pb) [Entry date 
07/13/98] [1:96cv1252] 

10 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

7/9/98 33 MEMORANDUM by defen- 
dant in 1:96-cv-01252 in sup- 
port of motion response [31-1] 
w/Exh: 1. article by Justice 
John Paul Stevens, “The 
Freedom of Speech” - CJT 
(pb) [Entry date 07/13/98] 
(1:96cv1252] 

7/10/98 30 SETTING LETTER; schedul- 
ing conference set for 4:00 
7/30/98 Rm 320 Fed Bldg 
Jackson before MagJBreen 
(bph) [1:96cv1252] 

7/17/98 34 

REPLY by USA to response 

to motion to dismiss [26-1], 
motion for summary judgment 
[26-2] w/Exh: 1. US COA 
opinion (recd fr Mphs 7/20/98) 
- CJT (pb) [Entry date 
07/21/98] [1:96cv1252] 

7/27/98 35 SETTING LETTER; schedul- 
ing conference reset for 9:15 
9/10/98 Rm 320 Fed Bldg 
Jackson before MagJBreen 
(bph) [1:96cv1252] 

11 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

7/28/98 36 

ORDER by Judge James D. 

Todd granting motion for 
summary judgment [26-2], 
granting motion for summary 
judgment [2-1] terminating 
party United Foods, Inc. in 
1:96-cv-01252, - CJT wpj, OB 
(cc: all counsel) (pb) [Entry 
date 07/29/98] [1:96cv1252] 

7/31/98 37 

JUDGMENT: in favor of pla 

USA by Judge James D. Todd 
dismissing case and (1:98-cv- 
01082) consolidation termed 
(cc: all counsel) (skp) [Entry 
date 08/03/98] [1:96cv1252] 

8/12/98 38 

MOTION by plaintiff USA to 

alter or amend jgmt (recd 
fr Mphs 8/14/98) - CJT 
(pb) [Entry date 08/14/98] 
[1:96cv1252] 

8/12/98 39 MEMORANDUM by plaintiff 

USA in support of motion to 
alter or amend jgmt [38-1] 
(recd fr Mphs 8/14/98) - CJT 
(pb) [Entry date 08/14/98] 
[1:96cv1252] 

12 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

8/21/98 40 RESPONSE by defendant 

United Foods, Inc. to motion 
to alter or amend jgmt [38-1] - 
CJT (pb) [Entry date 
08/24/98] [1:96cv1252] 

9/4/98 41 

ORDER by Judge James D. 

Todd denying motion to alter 
or amend jgmt [38-1] (cc: all 
counsel) CJT (bph) [1:96cv 
1252] 

9/24/98 42 NOTICE OF APPEAL by 
defendant United Foods, Inc. 
from Dist. Court decision 
order [36-2] - CJT (pb) [Entry 
date 09/25/98] (1:96cv1252) 

* * * * * 

13 

UNITED STATES DISTRICT COURT 
WESTERN DISTRICT OF TENNESSEE (JACKSON) 

No. 98-CV-1082 

UNITED FOODS, INC., PLAINTIFF 

v. 

UNITED STATES AND 

DEPARTMENT OF AGRICULTURE, DEFENDANTS 

DOCKET ENTRIES 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

3/23/98 1 COMPLAINT (Summons(es) 
issued) Receipt #: 19076; 
Filing fee $150.00 - CJT (gn) 
[1:98cv1082] 

3/27/98 2 MOTION by plaintiff for 
attorney Bradley A. MacLean 
to appear pro hac vice w/cert 
of good standing - CJT wpo 
(pb) [Entry date 03/30/98] 
[1:98cv1082] 

14 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

3/27/98 3 
PRO HAC VICE FEE PAID: 

in the amount of $ 10.00 
receipt # 19095 by Farris, 
Warfield & Kanaday on behalf 
of atty Bradley A. MacLean 
(pb) [Entry date 03/30/98] 
[1:98cv1082] 

3/27/98 4 

ORDER by Judge James D. 

Todd granting motion for 
attorney Bradley A. MacLean 
to appear pro hac vice [2-1] - 
CJT (cc: all counsel; B. 
Quarles) (pb) [Entry date 
03/30/98] [Edit date 03/30/98] 
[1:98cv1082] 

4/17/98 5 

ORDER by Judge James D. 

Todd consolidating cases 96- 
1252 w/98-1082 - CJT (cc: all 
counsel) (pb) [Entry date 
04/20/98] [1:98cv1082] 

4/27/98 6 

RETURN OF SERVICE exe- 
cuted upon defendant AGRI 

on 4/6/98, cert mail (pb) 
[Entry date 04/29/98] [1:98cv 
1082] 

15 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

4/27/98 7 

RETURN OF SERVICE exe- 
cuted upon defendant USA by 
Atty Genrl J. Reno on 3/30/98, 
cert mail (pb) [Entry date 
04/29/98] [1:98cv1082] 

4/27/98 8 

RETURN OF SERVICE exe- 
cuted upon defendant USA by 
USA/V. Coleman on 3/26/98, 
cert mail (pb) [Entry date 
04/29/98] [1:98cv1082] 

5/21/98 26 

MOTION by govt dft AGRI 

(US Dept of Agriculture) in 
1:98-cv-01082 to dismiss, or, in 
the alterntive [sic] , for sum- 
mary judgment - CJT (pb) 
[Entry date 05/22/98] [1:96cv 
1252 1:98cv1082] 

16 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

5/21/98 27 MEMORANDUM by govt dft 

AGRI (US Dept of Agri- 
culture) in 1:98-cv-01082 in 
support of motion to dismiss 
[26-1] in 1:98-cv-01082, of mo- 
tion for summary judgment 
[26- 2] 

in 1: 98- cv- 01082 
w/Exhs: 1-2. USDC memo- 
randum opinion/orders; 3. 
order; 4. program announce- 
ment; 5. USDA petition; 6. 
USDA decision/order of dis- 
missal; 7. USDA decision/ 
order -CJT (pb)[Entry date 
05/22/98] [1:96cv 1252 1:98cv 
1082] 

6/19/98 28 

MOTION by defendant United 

Foods, Inc. in 1:96-cv-01252, 
plaintiff United Foods, Inc. 
in 1:98-cv-01082 to extend 
time to file resp to the govt’s 
motion to dism - CJT wpo 
(pb) [Entry date 06/22/98] 
[1:96cv1252 1:98cv1082] 

17 

_________________________________________________ 

DOCKET 
DATE NUMBER PROCEEDINGS 

_________________________________________________ 

6/22/98 29 

ORDER by Judge James D. 

Todd granting motion to 
extend time to file resp to the 
govt’s motion to dism [28-1] 
in 1:96-cv-01252, 1:98-cv-01082 
- CJT (cc: all counsel) (pb) 
[Entry date 06/ 23/ 98] 
[1:96cv1252 1:98cv1082] 

7/28/98 30 

ORDER by Judge James D. 

Todd granting motion for 
summary judgment [26-2] 
terminating party AGRI in 
1:98-cv-01082, party USA in 
1:98-cv-01082 - CJT wpj, OB 
(cc: all counsel) (pb) [Entry 
date 07/29/98] [1:98cv1082] 

7/31/98 31 JUDGMENT: per order field 
[sic] 7/28/98 granting motion 
for summary judgment and 
judgment entered on behalf of 
USA by Judge James D. Todd 
terminating case and termi- 
nating case consolidation (cc: 
all counsel) (skp) [Entry date 
08/03/98] [1:98cv1082] 

18 

UNITED STATES COURT OF APPEALS 
FOR THE SIXTH CIRCUIT 

No. 98-6436 

UNITED FOODS, INC., PLAINTIFF-APPELLANT 

v. 

UNITED STATES OF AMERICA; 
UNITED STATES DEPARTMENT OF AGRICULTURE, 
DEFENDANT-APPELLEE 

DOCKET ENTRIES 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

10/28/98 Civil Case Docketed. Notice filed by 

Appellant United Foods Inc. Transcript 
needed: n (ac) 

10/28/98 BRIEFING LETTER SENT setting 
briefing schedule: appellant brief due 
12/7/98; appellee brief due 1/6/99; reply 
brief due 1/20/99; appendix due 1/27/99; 
final briefs due 2/17/99. [98-6436] (ac) 

11/12/98 APPEARANCE filed by Attorney Bradley 

A. MacLean for Appellant United Foods 
Inc [98-6436](ac) 

19 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

11/12/98 PRE-ARGUMENT STATEMENT filed by 

Bradley A. MacLean for Appellant United 
Foods Inc [98-6436] (ac) 

11/12/98 APPEARANCE filed by Attorney Tara 

Looney Swafford for Appellant United 
Foods Inc [98-6436] (ac) 

11/18/98 APPEARANCE filed by Attorney August 

E. Flentje for Appellees Dept of Agri- 
culture, USA [98-6436] (ac) 

11/18/98 APPEARANCE filed by Attorney Barbara 

C. Biddle for Appellees Dept of Agri- 
culture, USA [98-6436] (ac) 

12/10/98 PROOF BRIEF filed by Bradley A. 

MacLean for Appellant United Foods Inc. 
Certificate of service date 12/7/98 Number 
of Pages: 34. [98-6436] (ac) 

12/10/98 Request to require oral argument filed by 

Bradley A. MacLean for Appellant United 
Foods Inc [98-6436] (ac) 

1/11/99 PROOF BRIEF filed by August E. Flentje 
for Appellees Dept of Agriculture, USA. 
Certificate of service date 1/6/99. Number 
of Pages: 98. [98-6436] (ac) 

20 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

1/11/99 Request to waive oral argument and sub- 
mit case on the briefs, (waiver on page: 
unnumbered), filed by August E. Flentje 
for Appellee Dept of Agriculture, Ap- 
pellee USA [98-6436] (ac) 

1/22/99 PROOF REPLY BRIEF filed by Bradley 

A. MacLean for Appellant United Foods 
Inc. Certificate of service date 1/20/99 
[98-6436] (ac) 

2/1/99 APPENDIX filed by Bradley A. MacLean 
for Appellant United Foods Inc. Copies: 5. 
Certificate of service date 1/27/99 [98- 
6436] (ac) 

2/18/99 FINAL BRIEF filed by August E. Flentje 
for Appellees Dept of Agriculture, USA. 
Copies: 7. Certificate of service date 
2/16/99. Number of Pages: 98. [98-6436] 
(ac) 

2/18/99 Request to waive oral argument and sub- 
mit case on the briefs, (waiver on page: 
un-numbered), filed by August E. Flentje 
for Appellees Dept of Agriculture, USA 
[98-6436] (ac) 

21 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

2/22/99 FINAL BRIEF filed by Bradley A. 

MacLean for Appellant United Foods Inc. 
Copies: 7. Certificate of service date 
2/17/99 Number of Pages: 60. [98-6436] 
(ac) 

2/22/99 Request to require oral argument filed by 

Bradley A. MacLean for Appellant United 
Foods Inc [98-6436] (ac) 

2/22/99 FINAL REPLY BRIEF filed by Bradley 

A. MacLean for Appellant United Foods 
Inc. Copies: 7 Certificate of service date 
2/17/99 Number of Pages: 18. [98-6436] 
(ac) 

7/13/99 Oral argument date set for September 23, 
1999 in court room 403. Notice of argu- 
ment sent to counsel. [98-6436] (rld) 

8/16/99 ADDITIONAL CITATION filed by 

Bradley A. MacLean for Appellant United 
Foods Inc. Certificate of service date 
8/12/99 [98-6436] (yh) 

8/30/99 ADDITIONAL CITATION filed by August 

E. Flentje for Appellees Dept of Agri- 
culture, USA. Certificate of service date 
[98-6436] (ac) 

22 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

9/23/99 CAUSE ARGUED on 9/23/99 by Bradley 

A. MacLean for Appellant United Foods 
Inc, August E. Flentje for Appellee Dept 
of Agriculture, Appellee USA before 
Judges Merritt, Clay, Aldrich. [98-6436] 
(me) 

10/1/99 ADDITIONAL CITATION filed by August 

E. Flentje for Appellees Dept of Agri- 
culture, USA. Certificate of service date 
none but served. [98-6436] (ac) 

10/25/99 Appellant RESPONSE filed to appellees’ 
additional citations. Response from 
Bradley A. MacLean for Appellant United 
Foods Inc. Certificate of service date 
10/22/99. [98-6436] (mcp) 

11/23/99 OPINION filed: REVERSED decision for 
publication pursuant to local rule 206. [98- 
6436] Gilbert S. Merritt, Authoring Judge, 
Eric L. Clay, Circuit Judge, Ann Aldrich, 
District Judge. (ac) 

11/23/99 JUDGMENT: REVERSED. (ac) 

23 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

12/30/99 Appellee MOTION filed to extend time to 
file petition for rehearing until 1/21/00. 
Motion filed by August E. Flentje and 
Barbara C. Biddle for Appellee Dept of 
Agriculture, Appellee USA. Certificate of 
service date 12/29/99. [98-6436] (yh) 

1/3/00 RULING granting motion to extend time 
to file petition for rehearing [2075113-1] 
filed by August E. Flentje, Barbara C. 
Biddle. Petition to be filed by 1/21/00 for 
Barbara C. Biddle [98-6436] (yh) 

1/20/00 MOTION filed to allow Amer Mushroom 

Inst, et al to become an amicus curiae in 
support of appellees’ petition for rehear- 
ing en banc. Motion filed by John G. 
Roberts for Amer Mushroom Inst, et al. 
Certificate of service date 1/19/00. [98- 
6436] (blh) 

1/20/00 TENDERED: brief of amicus curiae in 
support of appellees’ petition for rehear- 
ing en banc from John G. Roberts for 
Amer Mushroom Inst, et al. [98-6436] 
(blh) 

24 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

1/21/00 PETITION for en banc rehearing filed by 

August E. Flentje for Appellees Dept of 
Agriculture, USA. Certificate of service 
date 1/20/00. [98-6436] (blh) 

1/21/00 APPEARANCE filed by Attorney John G. 

Roberts for Amer Mushroom Inst [98- 
6436] (blh) 

1/27/00 ORDER filed granting motion of The 

American Mushroom Institute for leave to 
file a brief in support of appellees’ petition 
for rehearing en banc [2087184-1] filed by 
John G. Roberts Jr. [98-6436]. Entered by 
order of the court. (blh) 

1/27/00 BRIEF filed by John G. Roberts for 

Amicus Curiae Amer Mushroom Inst. 
Copies 25. Certificate of service date 
1/19/00 (see certificate attached to motion 
filed 1/20/00). Number of Pages: 15. [98- 
6436] (blh) 

1/27/00 LETTER SENT by blh to Bradley A. 

MacLean for Appellant United Foods Inc 
notifying that party is directed to respond 
to a petition for en banc rehearing 
[2087142-1] filed by August E. Flentje and 
brief of amici curiae filed by John G. 
Roberts. Response due by 2/10/00. [98- 
6436]. (blh) 

25 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

2/10/00 Appellant MOTION filed to supplement 
certified record. Motion filed by Bradley 
A. MacLean for Appellant United Foods 
Inc. Certificate of service date 2/9/00 [98- 
6436] (ac) 

2/10/00 RESPONSE to a petition for en banc 
rehearing [2087142-1] filed by August E. 
Flentje. Response filed by Bradley A. 
MacLean for Appellant United Foods Inc. 
Certificate of service date 2/9/00. [98-6436] 
(blh) 

2/22/00 LETTER SENT by ac to Bradley A. 

MacLean for Appellant United Foods Inc 
regarding ruling on motion to supplement 
record on appeal. [98-6436]. (ac) 

2/22/00 Appellee RESPONSE in opposition filed 
regarding a motion to supplement certi- 
fied record. Response from August E. 
Flentje for Appellees. Certificate of 
service date 2/18/2000. [98-6436] (ac) 

3/23/00 ORDER filed denying petition for en banc 
rehearing [2087142-1] filed by August E. 
Flentje [98-6436]. Gilbert S. Merritt, Eric 
L. Clay, Circuit Judges; Ann Aldrich, 
District Judge. (blh) 

26 

_________________________________________________ 

DATE PROCEEDINGS_________________________________________________ 

3/30/00 Appellee MOTION filed to stay mandate. 

Motion filed by August E. Flentje and 
Barbara C. Biddle for Appellees Dept of 
Agriculture, USA. Certificate of service 
date 3/29/00. [98-6436] (ac) 

4/5/00 ORDER filed granting motion to stay 
mandate until 5/15/2000 filed by August 
E. Flentje, Barbara C. Biddle. [98-6436] 
Gilbert S. Merritt, Eric L. Clay, Circuit 
Judges, Ann Aldrich, District Judge. (ac) 

5/8/00 Appellee’s 2nd MOTION filed to stay 
mandate until 6/21/2000. Motion filed by 
August E. Flentje for Appellees Dept of 
Agriculture, USA. Certificate of service 
date 5/5/00. [98-6436] (ac) 

5/10/00 ORDER filed denying motion to stay 
mandate until 6/21/00 pending a decision 
whether to petition for certiorari filed by 
August E. Flentje. [98-6436] Gilbert S. 
Merritt, Eric L. Clay, Circuit Judges, Ann 
Aldrich, District Judge. (ac) 

5/17/00 MANDATE ISSUED with no cost taxed 
[98-6436] (ac) 

* * * * * 

27 

UNITED STATES DEPARTMENT OF 
AGRICULTURE BEFORE THE SECRETARY OF 
AGRICULTURE 

MPRCIA Docket No. 96-0001 

IN RE: UNITED FOODS, INC., A DELAWARE 

CORPORATION, D/B/A PICTSWEET MUSHROOM FARMS, 
PETITIONER 

[Filed: Dec 9, 1997] 

DECISION AND ORDER OF DISMISSAL 

This proceeding was initiated by a Petition filed by 
United Foods, Inc., on June 25, 1996, alleging that the 
Mushroom Promotion Research and Consumer Infor- 
mation Act (7 U.S.C. § 6101 et seq.) (“the Act” or 
“MPRCIA”), and the assessments imposed pursuant to 
the Act, violate Petitioner’s rights guaranteed under 
the First Amendment of the United States Consti- 
tution. 

On November 15, 1997, I issued an Order staying this 
proceeding pending the Supreme Court’s resolution of 
Glickman v. Wileman and/or USDA v. Cal-Almond. 
On June 25, 1997, the Court entered its decision in 
Glickman v Willeman, 117 S. Ct. 2130 (1997); and on 
June 27, 1997, the Court granted certiorari and, vacated 
the judgment in USDA v. Cal-Almond Inc., and re- 
manded the case to the Ninth Circuit for further con- 
sideration is light of Wileman. 117 S. Ct. 2501(1997). 

28 

On October 21, 1997, Respondent filed a motion to 
dismiss the Petition in accordance with the Wileman 
decision, which held that the use of mandatory assess- 
ments for generic advertising did not abridge freedom 
of speech within the meaning of the First Amendment. 
On November 14, 1997, Petitioner filed a written op- 
position to the motion to dismiss. Petitioner maintains 
that the holding in Wileman is not dispositive of the 
issues in this proceeding because the MPRCIA is 
significantly different than the marketing order ad- 
dressed in Wileman, and because Wileman did not 
address the freedom of association claims raised by 
Petitioner in this instant case. 

I disagree with Petitioner. I conclude that Wileman 
is dispositive of the issues herein. 

Petitioner contends that the Wileman case is dis- 
tinguishable because the peach and nectarine market- 
ing orders at issue there regulated other aspects of the 
market, and did not have promotion as their sole 
purpose as does the MPRCIA. This distinction has 
twice been rejected by the United States District Court 
for the Eastern District of California, in cases involving 
California table grapes and California cut flowers. In 
Delano Farms Co. v. California Grape Commission, 
the Court held that: 

[Wileman’s] holding is summarized in the first 
words of the principal dissent: “The Court today 
finds no First Amendment right to be free of 
coerced subsidization of commercial speech . . . .” 

That principle controls. Plaintiff ’s argument [that] a 
different result obtains when a program does not 
regulate fruit size, color, etc., is unconvincing. Were 

29 

that the case, the state could validate a program 
merely by adding additional regulatory burdens. 
Nothing in [Wileman] indicates results should differ 
in “stand alone” advertising programs. 

Delano Farms v. California Grape Comm’n, CV-F-96- 
6053 OWWDLB, slip op. at 6 (E.D. Cal. Sept. 11, 1997). 

In Matsui Nursery, Inc. v. California Cut Flower 
Comm’n, the Court, as stated during the hearing, held 
that: 

Plaintiff is mistaken in arguing that the California 
Cut Flower industry is to be distinguished from the 
more heavily regulated peach and nectarine pro- 
duction industry which the Wileman case con- 
sidered. The Wileman decision did not turn on the 
degree to which State or Federal Government has 
otherwise displaced free market competition. 
Rather, the Court found that compelled partici- 
pation in a generic advertising program is itself a 
form of economic regulation whose efficacy is to be 
judged by legislatures, Government officials and 
producers, and not by the Court under its free 
speech jurisdiction. 

Matsui Nursery, Inc., Civ No. S-96-102 EJG/GGH, slip 
op. at 12-13 (E.D. Cal. Aug. 6, 1997). 

Furthermore, in In re Donald B. Mills, Inc., 56 
Agric. Dec. ___ (Aug. 27, 1997), the Judicial Officer held 
that Wileman did extend to the MPRCIA, and that it 
did preclude the petitioner’s First Amendment claims 
with respect to manadatory assessments for generic 
advertising. Mills, supra at 44-48. 

30 

Petitioner also argues that the Supreme Court, in 
Wileman, did not sufficiently address the freedom of 
association issue for the Court’s Decision to be binding 
on that issue. This argument was also rejected in 
Delano Farms, which held that: 

[Wileman] was decided on “First Amendment” 
grounds and addressed association under a federal 
marketing order. There is no distinction between 
speech and association in the “ideologically neutral” 
context of a generic advertising program. 

Delano Farms, supra at 11. 

The Judicial Officer also held that neither freedom of 
association nor freedom of speech are infringed by the 
MPRCIA. He held: 

[T]he requirement under the MPRCIA and the 
Mushroom Order that Petitioner fund the promotion 
of fresh mushrooms does not violate Petitioner’s 
rights to freedom of association and speech under 
the First Amendment to the Constitution of the 
United States, and Petitioner’s rights under the 
First Amendment are not even implicated by the 
MPRCIA or the Mushroom Order. 

Mills, supra at 48. 

Accordingly, the Petition must be dismissed. 

ORDER 

The Petition is dismissed with prejudice. 

This Decision and Order of Dismissal shall become 
final and effective 35 days after its service upon Peti- 

31 

tioner unless within 30 days of its service, Petitioner 
files an appeal pursuant to 7 C.F.R § 900.65. 

/s/ EDWIN S. BERNSTEIN 
EDWIN S. BERNSTEIN 
Administrative Law Judge 

December 9, 1997 

32 

UNITED STATES DEPARTMENT OF AGRICULTURE 
BEFORE THE SECRETARY OF AGRICULTURE 

MPRCIA Docket No. 96-0001 

IN RE: UNITED FOODS, INC., 

A DELAWARE CORPORATION, D/B/A 

PICTSWEET MUSHROOM FARMS, PETITIONER 

[Filed: Mar. 4, 1998] 

DECISION AND ORDER 

I. INTRODUCTION 

United Foods, Inc., a Delaware corporation, d/b/a 
Pictsweet Mushroom Farms [hereinafter Petitioner], 
instituted this proceeding on June 25, 1996, under the 
Mushroom Promotion, Research, and Consumer Infor- 
mation Act of 1990, as amended (7 U.S.C. §§ 6101-6112) 
[hereinafter the MPRCIA]; the Mushroom Promotion, 
Research, and Consumer Information Order (7 C.F.R. 
§§ 1209.1-.77) [hereinafter the Mushroom Order]; the 
Rules and Regulations (7 C.F.R. §§ 1209.200-.280) 
[hereinafter the Mushroom Regulations]; and the Rules 
of Practice Governing Proceedings on Petitions To 
Modify or To Be Exempted From Research, Promotion 
and Education Programs (7 C.F.R. §§ 900.52(c)(2)-.71, 
1200.50-.52) [hereinafter the Rules of Practice], by filing 
a Petition pursuant to 7 U.S.C. § 6106. 

Petitioner alleges that the MPRCIA and assessments 
pursuant to the MPRCIA violate Petitioner’s rights to 

33 

freedom of association and freedom of speech guaran- 
teed under the First Amendment of the Constitution of 
the United States (Pet. ¶ 23). Petitioner seeks an 
exemption from assessments imposed in connection 
with the Mushroom Order and a refund of any past paid 
assessments under the Mushroom Order (Pet. ¶ 23). 

On July 25, 1996, the Administrator of the Agricul- 
tural Marketing Service, United States Department of 
Agriculture [hereinafter Respondent], filed Answer of 
Respondent [hereinafter Answer] stating: (1) the Peti- 
tion fails to state a claim upon which relief can be 
granted (Answer at 4); and (2) the MPRCIA, the 
Mushroom Order, and the Mushroom Regulations, as 
interpreted by Respondent and the Mushroom Council, 
are constitutional and otherwise fully in accordance 
with law (Answer at 4). 

On November 15, 1996, Administrative Law Judge 
Edwin S. Bernstein [hereinafter ALJ] stayed the hear- 
ing in this proceeding pending action by the Supreme 
Court of the United States in Cal-Almond, Inc. v. 
Department of Agric., 14 F.3d 429 (9th Cir. 1993), 67 
F.3d 874 (9th Cir. 1995), petition for cert. filed, 65 
U.S.L.W. 3052 (U.S. May 20, 1996) (No. 95-1879), and 
Wileman Bros. & Elliott, Inc. v. Espy, 58 F.3d 1367 
(9th Cir. 1995), cert. granted sub nom. Glickman v. 
Wileman Bros. & Elliott, Inc., 116 S. Ct. 1875 (1996), 
based on the ALJ’s expectation that the Supreme 
Court of the United States would issue guidance in 
Wileman Bros. or Cal-Almond, or both Wileman Bros. 
and Cal-Almond, which might resolve the issue of Peti- 
tioner’s First Amendment challenge in this proceeding 
(Summary of Teleconference—Stay Order, filed 
November 15, 1996). 

34 

On June 25, 1997, the Supreme Court of the United 
States entered its decision in Glickman v. Wileman 
Bros. & Elliott, Inc., 117 S. Ct. 2130 (1997), holding that 
compelled funding of generic advertising of California 
nectarines, plums, and peaches in accordance with 
Marketing Order 916 (7 C.F.R. pt. 916) and Marketing 
Order 917 (7 C.F.R. pt. 917), both of which are issued 
under the Agricultural Marketing Agreement Act of 
1937, as amended [hereinafter AMAA], neither abridge 
First Amendment rights nor implicate the First 
Amendment. Moreover, on June 27, 1997, the Supreme 
Court of the United States granted the petition for a 
writ of certiorari in Cal-Almond, vacated the judgment 
of the United States Court of Appeals for the Ninth 
Circuit, and remanded the case to the United States 
Court of Appeals for the Ninth Circuit for further 
consideration in light of Glickman v. Wileman Bros. & 
Elliott, Inc., 117 S. Ct. 2130 (1997). Department of 
Agric. v. Cal-Almond, Inc., 117 S. Ct. 2501 (1997). On 
September 4, 1997, the United States Court of Appeals 
for the Ninth Circuit remanded Cal-Almond “to the 
district court with instruction to dismiss Cal-Almond’s 
First Amendment claim.” 

On October 21, 1997, Respondent, relying on, inter 
alia, Wileman Bros., filed a motion to dismiss Peti- 
tioner’s Petition (Respondent’s Motion to Dismiss), and 
on November 14, 1997, Petitioner filed Petitioner’s Op- 
position to Respondent’s Motion to Dismiss. On 
December 9, 1997, the ALJ issued Decision and Order 
of Dismissal [hereinafter Initial Decision and Order] in 
which the ALJ concluded that Glickman v. Wileman 
Bros. & Elliott, Inc., 117 S. Ct. 2130 (1997), is disposi- 
tive of the issues in this proceeding and dismissed the 
Petition with prejudice. 

35 

On January 14, 1998, Petitioner appealed to the 
Judicial Officer to whom the Secretary of Agriculture 
has delegated authority to act as final deciding officer in 
the Department’s adjudicatory proceedings subject to 
5 U.S.C. §§ 556 and 557 (7 C.F.R. § 2.35)1; on February 
17, 1998, Respondent filed Respondent’s Response to 
Petitioner’s Appeal to the Judicial Officer; and on 
February 18, 1998, the case was referred to the Judicial 
Officer for decision. 

Based upon a careful consideration of the record in 
this proceeding, I agree with the ALJ’s conclusion that 
Glickman v. Wileman Bros. & Elliott, Inc., supra, is 
dispositive of the First Amendment issue in this pro- 
ceeding and that Petitioner’s Petition should be dis- 
missed with prejudice. Therefore, I have adopted the 
ALJ’s Initial Decision and Order as the final decision 
and order. Additions or changes to the Initial Decision 
and Order are shown by brackets, deletions are shown 
by dots, and minor editorial changes are not specified. 
Additional conclusions by the Judicial Officer follow the 
ALJ’s Initial Decision and Order. 

1 The position of Judicial Officer was established pursuant to 
the Act of April 4, 1940 (7 U.S.C. §§ 450c-450g); section 4(a) of Re- 
organization Plan No. 2 of 1953, 18 Fed. Reg. 3219, 3221 (1953), re- 
printed in 5 U.S.C. app. § 4(a) at 1491 (1994); and section 212(a)(1) 
of the Department of Agriculture Reorganization Act of 1994 
(7 U.S.C. § 6912(a)(1)). 

36 

II. APPLICABLE CONSTITUTIONAL, STATUTORY, 
AND REGULATORY PROVISIONS 

[omitted] 

III. ALJ’S DECISION AND ORDER OF DISMISSAL 
(AS MODIFIED) 

. . . . 

Petitioner contends that [Glickman v. Wileman 
Bros. & Elliott, Inc., supra,] is distinguishable [from 
the facts in this proceeding] because the marketing 
orders at issue [in Wileman Bros.] regulate . . . 
aspects of the market [that are not regulated under] the 
MPRCIA. This distinction has twice been rejected by 
the United States District Court for the Eastern Dis- 
trict of California, in cases involving California table 
grapes and California cut flowers. In Delano Farms 
Co. v. California Table Grape Commission, the court 
held that: 

[Wileman’s] holding is summarized in the first 
words of the principal dissent: “The Court today 
finds no First Amendment right to be free of 
coerced subsidization of commercial speech . . . .” 

That principle controls. Plaintiff ’s argument [that] a 
different result obtains when a program does not 
regulate fruit size, color, etc. is unconvincing. Were 
that the case, the state could validate a program 
merely by adding additional regulatory burdens. 
Nothing in [Wileman Bros.] indicates results should 
differ in “stand alone” advertising programs. 

37 

Delano Farms Co. v. California Table Grape Comm’n, 
CV-F-96-6053 OWW DLB, slip op. at 6 (E.D. Cal. Sept. 
11, 1997). 

In Matsui Nursery, Inc. v. California Cut Flower 
Commission, the court, as stated during the hearing, 
held that: 

Plaintiff is mistaken in arguing that the California 
Cut Flower industry is to be distinguished from the 
more heavily regulated peach and nectarine pro- 
duction industry which the Wileman case con- 
sidered. The Wileman decision did not turn on the 
degree to which State or Federal Government has 
otherwise displaced free market competition. 
Rather, the Court found that compelled participa- 
tion in a generic advertising program is itself a form 
of economic regulation whose efficacy is to be 
judged by legislatures, Government officials and 
producers, and not by the Court under its free 
speech jurisdiction. 

Matsui Nursery, Inc. v. California Cut Flower 
Comm’n, Civ No. S-96-102 EJG/GGH, slip op. at 12-13 
(E.D. Cal. Aug. 4, 1997) (Reporter’s Transcript). 

Furthermore, in In re Donald B. Mills, Inc., 56 
Agric. Dec. ___ (Aug. 27, 1997), appeal docketed, No. 
CIV F-97-5890 OWW SMS (E.D. Cal. Sept. 17, 1997), 
the Judicial Officer held that Wileman Bros. did extend 
to the MPRCIA, and that it did preclude the peti- 
tioner’s First Amendment claims with respect to man- 
datory assessments for generic advertising. In re 
Donald B. Mills, Inc. supra, slip op. at 4[3]-48. 

38 

Petitioner also argues that the Supreme Court of the 
United States, in Wileman Bros., did not sufficiently 
address the freedom of association issue for the Court’s 
decision to be binding on that issue. This argument was 
also rejected in Delano Farms, which held that: 

[Wileman Bros.] was decided on “First Amend- 
ment” grounds and addressed association under a 
federal marketing order. There is no distinction 
between speech and association in the “ideologically 
neutral” context of a generic advertising program. 

Delano Farms Co. v. California Table Grape Comm’n, 
supra, slip op. at 11. 

The Judicial Officer also held that neither freedom of 
association nor freedom of speech are infringed by the 
MPRCIA. He held: 

[T]he requirement under the MPRCIA and the 
Mushroom Order that Petitioner fund the promotion 
of fresh mushrooms does not violate Petitioner’s 
rights to freedom of association and speech under 
the First Amendment to the Constitution of the 
United States, and Petitioner’s rights under the 
First Amendment are not even implicated by the 
MPRCIA or the Mushroom Order. 

In re Donald B. Mills, Inc., supra, slip op. at 48. 

IV. ADDITIONAL CONCLUSIONS BY THE JUDI- 
CIAL OFFICER 

Petitioner raises four issues in Petitioner’s Appeal to 
the Secretary [hereinafter Petitioner’s Appeal Peti- 
tion]. 

39 

A. Motion to Dismiss 

First, Petitioner contends: 

. . . [A]ll of the facts in the Complaint must be 
construed in the light most favorable to the 
Petitioner, consistent with Federal Rules of Civil 
Procedure Rule 12(c) or Rule 12(b)(6) with respect 
to motions to dismiss complaints. The dismissal 
occurred in this case without the benefit of a 
hearing. “[A] complaint should not be dismissed for 
failure to state a claim unless it appears beyond 
doubt that the plaintiff can prove no set of facts in 
support of his claim which would entitle him to 
relief.” Conley v. Gibson, 355 U.S. 41, 45-46 (1957). 

Petitioner’s Appeal Petition at 3. 

Petitioner’s reliance on Rule 12(b)(6) and Rule 12(c) 
of the Federal Rules of Civil Procedure is misplaced. 
Rule 1 of the Federal Rules of Civil Procedure provides 
that the Federal Rules of Civil Procedure govern pro- 
cedure in the United States district courts, as follows: 

Rule 1. Scope and Purpose of Rules 

These rules govern the procedure in the United 
States district courts in all suits of a civil nature 
whether cognizable as cases at law or equity or in 
admiralty, with the exceptions stated in Rule 81. 
They shall be construed and administered to se- 
cure the just, speedy, and inexpensive deter- 
mination of every action. 

Fed. R. Civ. P. 1. 

40 

The Federal Rules of Civil Procedure are not 
applicable to administrative proceedings which are 
conducted before the Secretary of Agriculture, under 
the MPRCIA, and in accordance with the Rules of 
Practice (7 C.F.R. §§ 900.52(c)(2)-.71, 1200.50-.52).2 

2 See generally, Morrow v. Department of Agric., 65 F.3d 168 
(Table) (per curiam) 1995 WL 523336 (6th Cir. 1995), printed in 54 
Agric. Dec. 870 (1995) (stating that neither the Federal Rules of 
Civil Procedure nor the Federal Rules of Criminal Procedure ap- 
ply to administrative hearings); Mister Discount Stockbrokers, Inc. 

v. SEC, 768 F.2d 875, 878 (7th Cir. 1985) (stating that neither the 
Federal Rules of Civil Procedure nor the Federal Rules of Crimi- 
nal Procedure apply to administrative hearings); In re Kreider 
Dairy Farms, Inc., 57 Agric. Dec. ___, slip op. at 12 (Feb. 20, 1998) 
(Order Denying Pet. for Recons.) (stating that the Federal Rules 
of Civil Procedure are not applicable to Department proceedings 
conducted before the Secretary of Agriculture, under the Agricul- 
tural Marketing Agreement Act of 1937, as amended, and in 
accordance with the Rules of Practice Governing Proceedings To 
Modify or To Be Exempted From Marketing Orders); In re Dean 
Byard, 56 Agric. Dec. ___, slip op. at 21 (Aug. 8, 1997) (stating that 
while respondent’s reference to the “standard” Rules of Civil Pro- 
cedure is unclear, no rules of civil procedure govern a proceeding 
instituted under the Horse Protection Act of 1970, as amended, 
and the Rules of Practice Governing Formal Adjudicatory Pro- 
ceedings Instituted by the Secretary Under Various Statutes); In 
re Far West Meats, 55 Agric. Dec. 1045, 1055-56 (1996) (Clari- 
fication of Ruling on Certified Questions) (stating that the Federal 
Rules of Civil Procedure are not applicable to Department pro- 
ceedings conducted under the Rules of Practice Governing Formal 
Adjudicatory Proceedings Instituted by the Secretary Under 
Various Statutes); In re Far West Meats, 55 Agric. Dec. 1033, 1039- 
40 (1996) (Ruling on Certified Questions) (stating that the Federal 
Rules of Civil Procedure are not applicable to Department pro- 
ceedings conducted under the Rules of Practice Governing Formal 
Adjudicatory Proceedings Instituted by the Secretary Under 
Various Statutes); In re James Joseph Hickey, Jr., 53 Agric. Dec. 
1087, 1096-99 (1994) (stating the Federal Rules of Civil Procedure 

41 

However, I agree with Petitioner’s general point that, 
when considering a motion to dismiss filed in accor- 
dance with the Rules of Practice, allegations of material 
fact in a petition must be construed in the light most 
favorable to a petitioner.3 However, even if the allega- 
tions of material fact in the Petition are construed in 
the light most favorable to Petitioner, I find that Glick- 
man v. Wileman Bros. & Elliott, Inc., 117 S. Ct. 2130 
(1997), is dispositive of Petitioner’s First Amendment 
claims and that the Petition fails to state a claim upon 
which relief can be granted. Therefore, I agree with 
the ALJ’s Initial Decision and Order in which he 
granted Respondent’s Motion to Dismiss and dismissed 
Petitioner’s Petition with prejudice. 

are not applicable to the Department’s disciplinary proceedings 
conducted in accordance with the Rules of Practice Governing For- 
mal Adjudicatory Proceedings Instituted by the Secretary Under 
Various Statutes), aff ’d, 878 F.2d 385, 1989 WL 71462 (9th Cir. 
1989) (not to be cited as precedent under 9th Circuit Rule 36-3), 
printed in 48 Agric. Dec. 107 (1989); In re Shasta Livestock Auc- 
tion Yard, Inc., 48 Agric. Dec. 491, 504 n.5 (1989) (holding the 
Federal Rules of Civil Procedure are not followed in proceedings 
before the Department of Agriculture). 

3 In re Midway Farms, Inc., 56 Agric. Dec. 102, 113-14 (1997) 
(stating that allegations of material fact in a petition must be con- 
strued in the light most favorable to a petitioner claiming handler 
status when considering a motion to dismiss filed pursuant to 
7 C.F.R. § 900.52(c)); In re Asakawa Farms, Inc., 50 Agric. Dec. 
1144, 1149 (1991) (stating that allegations of material fact in a peti- 
tion must be construed in the light most favorable to a petitioner 
claiming handler status when considering a motion to dismiss for 
want of standing filed pursuant to 7 C.F.R. § 900.52(c)), dismissed, 
No. CV-F-91-686-OWW (E.D. Cal. Sept. 28, 1993). 

42 

B. First Amendment 

1. Freedom of Speech 

Second, Petitioner contends that Glickman v. Wile- 
man Bros. & Elliott, Inc., 117 S. Ct. 2130 (1997), and 
Department of Agric. v. Cal-Almond, Inc., 117 S. Ct. 
2501 (1997), are not dispositive of Petitioner’s First 
Amendment challenges to compelled assessments to 
fund the generic promotion program under the 
MPRCIA (Petitioner’s Appeal Petition at 3-7). 

The Supreme Court of the United States held in 
Glickman v. Wileman Bros. & Elliott, Inc., 117 S. Ct. 
2130 (1997), that compelled funding of generic advertis- 
ing of California nectarines, plums, and peaches in 
accordance with Marketing Order 916 (7 C.F.R. pt. 916) 
and Marketing Order 917 (7 C.F.R. pt. 917), both of 
which are issued under the AMAA, neither abridge 
First Amendment rights nor implicate the First 
Amendment. 

As Petitioner correctly notes (Petitioner’s Appeal 
Petition at 4), the Court in Wileman Bros. stressed the 
importance of the statutory context in which the First 
Amendment issue arises. However, the Court did not 
limit its holding to marketing orders issued under the 
AMAA. Instead, the Court held that three characteris- 
tics of the regulatory scheme at issue in Wileman Bros. 
distinguish it from laws that the Court found to abridge 
the freedom of speech protected by the First Amend- 
ment, as follows: (1) the marketing orders impose no 
restraint on the freedom of any producer to communi- 
cate any message to any audience; (2) the marketing 
orders do not compel any person to engage in any 
actual or symbolic speech; and (3) the marketing orders 

43 

do not compel producers to endorse or finance any 
political or ideological views. 

An examination of the MPRCIA, the Mushroom 
Order, and the Mushroom Regulations reveals that the 
MPRCIA, the Mushroom Order, and the Mushroom 
Regulations have the very same three characteristics 
which the Court found dispositive of the First Amend- 
ment issue in Glickman v. Wileman Bros. & Elliott, 
Inc., supra.4 First, Petitioner is not prohibited or 
restrained by the MPRCIA, the Mushroom Order, the 
Mushroom Regulations, or the Mushroom Council from 
promoting or advertising its brand of mushrooms or 
from communicating any other message to any audi- 
ence. Section 501(b)(4)-(5) of the Federal Agriculture 
Improvement and Reform Act of 1996 specifically 
provides that neither the MPRCIA, the Mushroom 
Order, nor the Mushroom Regulations prohibits or 
restricts any individual advertising or promotion or 
replaces the individual advertising or promotion efforts 
of producers or processors (110 Stat. 1030). This factor 
distinguishes the MPRCIA, the Mushroom Order, and 
the Mushroom Regulations from cases in which the 
Supreme Court has found that restrictions on com- 
mercial speech violate the right to freedom of speech.5 

4 In re Donald B. Mills, Inc., 56 Agric. Dec. ___, slip op. at 43- 
44 (Aug. 27, 1997), appeal docketed, No. CIV F-97-5890 OWW SMS 
(E.D. Cal. Sept. 17, 1997). 

5 See 44 Liquormart, Inc. v. Rhode Island, 116 S. Ct. 1495 
(1996) (holding that a state statute which bans price advertising for 
alcoholic beverages abridges speech in violation of the First 
Amendment as made applicable to the states by the Fourteenth 
Amendment); Central Hudson Gas & Elec. Corp. v. Public Serv. 
Comm’n, 447 U.S. 557 (1980) (holding that a New York Public Ser- 
vice Commission ban on advertising by an electric utility to 

44 

While the requirement that Petitioner fund generic 
advertising may reduce the amount of money available 
to Petitioner to conduct its own advertising or com- 
municate other messages, this incidental effect of the 
MPRCIA, the Mushroom Order, and the Mushroom 
Regulations does not amount to a restriction on speech.6 

promote the use of electricity violates the First and Fourteenth 
Amendments); Virginia State Bd. of Pharmacy v. Virginia Citi- 
zens Consumer Council, Inc., 425 U.S. 748 (1976) (holding that a 
state statute which bans the advertising of prescription drug 
prices violates the First and Fourteenth Amendments). 

6 In re Donald B. Mills, Inc., 56 Agric. Dec. ___, slip op. at 45 
(Aug. 27, 1997), appeal docketed, No. CIV F-97- 5890 OWW SMS 
(E.D. Cal. Sept. 17, 1997) (stating that while the requirement that 
petitioner fund generic advertising may reduce the amount of 
money available to petitioner to conduct its own advertising or 
communicate other messages, this incidental effect of the 
MPRCIA and the Mushroom Order does not amount to a restric- 
tion on speech). See also Glickman v. Wileman Bros. & Elliott, 
Inc., 117 S. Ct. 2130, 2138-39 (1997) (stating that the First Amend- 
ment has never been construed to require heightened scrutiny of 
any financial burden that has the incidental effect of constraining 
the size of a firm’s advertising budget and the fact that an eco- 
nomic regulation may indirectly lead to a reduction in an individual 
advertising budget does not itself amount to a restriction on 
speech); In re Cal-Almond, Inc., 56 Agric. Dec. ___, slip op. at 86- 
87 (Dec. 24, 1997) (stating that while the requirement that peti- 
tioners fund generic advertising may reduce the amount of money 
available to petitioners to conduct their own advertising or com- 
municate other messages, this incidental effect of the AMAA and 
the Almond Order does not amount to a restriction on speech); In 
re Jerry Goetz, 56 Agric. Dec. ___, slip op. at 33 (Nov. 3, 1997) 
(stating that even if the requirements of the Beef Promotion and 
Research Act of 1985 (7 U.S.C. §§ 2901-2911), the Beef Promotion 
and Research Order (7 C.F.R. §§ 1260.101-.217), and the Rules and 
Regulations (7 C.F.R. §§ 1260.301-.316) did reduce resources avail- 
able to respondent to engage in his own speech, this incidental 
effect would not amount to a restriction on speech). 

45 

Second, Petitioner is not compelled to speak by either 
the MPRCIA, the Mushroom Order, or the Mushroom 
Regulations. This fact distinguishes the MPRCIA, the 
Mushroom Order, and the Mushroom Regulations from 
cases in which the Supreme Court has found that 
compelled speech violates the right to freedom of 
speech or association.7 While Petitioner is compelled 
under the MPRCIA, the Mushroom Order, and the 
Mushroom Regulations to fund promotion of mush- 
rooms, this requirement is not a requirement that 
Petitioner speak. Petitioner is not publicly identified or 
publicly associated with the Mushroom Council’s pro- 
motion program, and Petitioner is not required to 
respond to the Mushroom Council’s promotion 
program.8 

7 See Hurley v. Irish-American Gay, Lesbian & Bisexual 
Group of Boston, 515 U.S. 557 (1995) (holding that requiring pri- 
vate citizens who organize a parade to include a group which 
imparts a message that organizers do not wish to convey violates 
the First Amendment); Riley v. National Federation of the Blind 
of North Carolina, 487 U.S. 781 (1988) (holding that a state statute 
requiring professional fund raisers to disclose to potential donors 
the percentage of charitable contributions collected that were 
turned over to the charity mandates speech in violation of the 
First Amendment); Wooley v. Maynard, 430 U.S. 705 (1977) (hold- 
ing that a state statute requiring an individual to display an 
ideological message on his or her private property violates the 
First Amendment); West Virginia State Bd. of Educ. v. Barnette, 
319 U.S. 624 (1943) (holding that action of a state making it compul- 
sory for children in public schools to salute the flag and pledge 
allegiance to the flag and the republic for which the flag stands 
violates the First and Fourteenth Amendments). 

8 In re Donald B. Mills, Inc., 56 Agric. Dec. ___, slip op. at 46 
(Aug. 27, 1997), appeal docketed, No. CIV F-97- 5890 OWW SMS 
(E.D. Cal. Sept. 17, 1997). 

46 

Finally, on the issue of freedom of speech, the 
Mushroom Council’s mushroom promotion program has 
no political or ideological content, and Petitioner is not 
compelled by the MPRCIA, the Mushroom Order, or 
the Mushroom Regulations to endorse or finance any 
political or ideological views. Section 501(b)(8)(B) of the 
Federal Agriculture Improvement and Reform Act of 
1996 specifically provides that the MPRCIA establishes 
a program to produce “nonideological and commercial 
communication the purpose of which is to further the 
governmental policy and objective of maintaining and 
expanding . . . markets . . .” (110 Stat. 1031). This 
fact distinguishes the MPRCIA, the Mushroom Order, 
and the Mushroom Regulations from cases in which the 
Supreme Court has found that required financing of 
political or ideological speech violates the right to 
freedom of speech.9 

I find that Glickman v. Wileman Bros. & Elliott, 
Inc., supra, is dispositive of the First Amendment issue 
in this proceeding. The differences between the regu- 
latory scheme in the marketing orders at issue in Wile- 
man Bros. and the regulatory scheme at issue in this 

9 See Keller v. State Bar of California, 496 U.S. 1 (1990) (hold- 
ing that a state bar’s use of compulsory dues paid by attorneys to 
finance political or ideological activities with which the attorneys 
disagree violates the attorneys’ First Amendment right of free 
speech when such expenditures are not necessarily or reasonably 
incurred for the purpose of regulating the legal profession or 
improving the quality of legal services); Abood v. Detroit Bd. of 
Educ., 431 U.S. 209 (1977) (holding that a union’s use of compul- 
sory service charges paid by public school teachers to finance 
ideological causes with which the teachers disagree violates the 
teachers’ First Amendment right to freedom of speech when such 
expenditures are not germane to the union’s duties as a collective 
bargaining representative). 

47 

proceeding are not relevant to Petitioner’s First 
Amendment challenge to the MPRCIA and the 
assessments imposed pursuant to the MPRCIA. Thus, 
the requirement under the MPRCIA, the Mushroom 
Order, and the Mushroom Regulations that Petitioner 
fund the promotion of fresh mushrooms does not violate 
Petitioner’s right to freedom of speech under the First 
Amendment to the Constitution of the United States, 
and Petitioner’s rights under the First Amendment are 
not even implicated by the MPRCIA, the Mushroom 
Order, or the Mushroom Regulations. 

10 

2. Freedom of Association 

Third, Petitioner contends that Glickman v. Wile- 
man Bros. & Elliott, Inc., 117 S. Ct. 2130 (1997), does 
not dispose of Petitioner’s claim that the MPRCIA and 
the assessments imposed pursuant to the MPRCIA 
violate Petitioner’s right to freedom of association guar- 
anteed under the First Amendment of the Constitution 
of the United States (Petitioner’s Appeal Petition at 7- 

11). 

I disagree with Petitioner. The Court in Wileman 
Bros. addresses freedom of association stating that, in 
contrast to compelled contributions for collective bar- 
gaining where an employee may have ideological, 
moral, or religious objections to the union’s activities, 
“the collective programs authorized by the marketing 
order do not, as a general matter, impinge on speech or 
association rights.” Glickman v. Wileman Bros. & 
Elliott, Inc., supra, 117 S. Ct. at 2140 n.16. The United 

10 In re Donald B. Mills, Inc., 56 Agric. Dec. ___, slip op. at 48 
(Aug. 27, 1997), appeal docketed, No. CIV F-97-5890 OWW SMS 
(E.D. Cal. Sept. 17, 1997). 

48 

States District Court for the Eastern District of Cali- 
fornia, examining the constitutionality of a law per- 
mitting the California Table Grape Commission to 
assess shipped grapes to fund generic advertising of 
California table grapes, states “[t]he predicate of [Wile- 
man Bros.] is that there is no First Amendment right 
of association not to be compelled to associate for 
generic advertising” and that “no compelling purpose is 
needed . . . to require commercial association.” 
Delano Farms Co. v. California Table Grape Comm’n, 
supra, slip op. at 11 (emphasis in original). 

Moreover, I have previously held, based on Wileman 
Bros., that freedom of association is not infringed by 
compelled funding of the generic promotion program 
under the MPRCIA and the Mushroom Order, as 
follows: 

[T]he requirement under the MPRCIA and the 
Mushroom Order that Petitioner fund the promotion 
of fresh mushrooms does not violate Petitioner’s 
right [] to freedom of association . . . under the 
First Amendment to the Constitution of the United 
States, and Petitioner’s rights under the First 
Amendment are not even implicated by the 
MPRCIA or the Mushroom Order. 

In re Donald B. Mills, Inc., supra, slip op. at 48. 

C. Amendment of Petition 

Fourth, Petitioner contends that the ALJ erred by 
not allowing Petitioner to amend its Petition, as follows: 

. . . In Petitioner’s Opposition to the Respondent’s 
Motion to Dismiss, at page 11 of that document, 
United Foods alleged that when it filed its Com- 

49 

plaint, it was consistent with the Ninth Circuit 
decisions in Wileman and Cal-Almond. It was 
claimed that the U.S. Supreme Court had an- 
nounced a new “test”. Petitioners [sic] sought in 
that brief to be allowed to amend its Petition to 
allege factual allegations in light of the Supreme 
Court Wileman case. The ALJ never addressed the 
issue. Therefore, the ALJ’s decision should be 
reversed, and United Foods should be given the 
opportunity to amend its Complaint in light of the 
Wileman decision. There would be no prejudice to 
the Respondent. 

Petitioner’s Appeal Petition at 11 (emphasis in 
original). 

Petitioner states in Petitioner’s Opposition to 
Respondent’s Motion to Dismiss, filed November 14, 
1997, that Petitioner should be entitled to amend its 
Petition, as follows: 

When Petitioner filed this complaint, it filed it 
consistent with the Ninth Circuit decisions in Wile- 
man and Cal-Almond. The U.S. Supreme Court 
has now announced a new “test”. Petitioner should 
be entitled to amend its petition to allege factual 
allegations in light of Wileman. The rules of prac- 
tice allow amending petitions. There would be no 
prejudice to the Respondent. 

Petitioner’s Opposition to Respondent’s Motion to Dis- 
miss at 11. 

50 

Section 900.52b of the Rules of Practice (7 C.F.R. § 
900.52b) provides for the amendment of pleadings, as 
follows: 

§ 900.52b Amended pleadings. 

At any time before the close of the hearing the 
petition or answer may be amended, but the hearing 
shall, at the request of the adverse party, be 
adjourned or recessed for such reasonable time as 
the judge may determine to be necessary to protect 
the interests of the parties. Amendments subse- 
quent to the first amendment or subsequent to the 
filing of an answer may be made only with leave of 
the judge or with the written consent of the adverse 
party. 

7 C.F.R. § 900.52b. 

Further, section 900.59(a)(2) provides that the judge 
is authorized to rule on all motions and requests, as 
follows: 

§ 900.59 Motions and requests. 

(a) General. . . . 

(2) The judge is authorized to rule upon all 
motions and requests filed or made prior to the 
transmittal by the hearing clerk to the Secretary of 
the record as provided in this subpart. . . . 

7 C.F.R. § 900.59(a)(2). 

However, Petitioner’s statement (that “Petitioner 
should be entitled to amend its petition to allege factual 
allegations in light of Wileman”) in Petitioner’s Opposi- 

51 

tion to Respondent’s Motion to Dismiss is in the form of 
a statement, rather than an application or request for a 
ruling, and I do not find that Petitioner’s statement is a 
motion. 

11 While the formalities of court practice do not 

11 Black’s Law Dictionary 1013 (6th ed. 1990) defines the word 
motion as follows: 

Motion. . . . 

An application made to a court or judge for purpose of 

obtaining a rule or order directing some act to be done in 
favor of the applicant. . . . 

See generally United States v. Brick, 905 F.2d 1092, 1098-99 (7th 
Cir. 1990) (concluding that statements made by the government to 
the court, including the statement that defendant’s cooperation 
should be considered, do not satisfy the motion requirement under 
section 5K1.1 of the Sentencing Guidelines); United States v. 
Coleman, 895 F.2d 501, 505 (8th Cir. 1990) (stating that letters 
from the government informing the court of defendant’s coopera- 
tion, although the functional equivalent of a motion, do not satisfy 
the motion requirement of 18 U.S.C. § 3553(e)); St. Paul Fire & 
Marine Ins. Co. v. Continental Casualty Co., 684 F.2d 691, 693 
(10th Cir. 1982) (stating that St. Paul’s “Objections to Proposed 
Order” is technically not a motion because it is in the form of a 
statement rather than an application or request for an order and 
does not set forth the relief or order sought); In re Marriage of 
Houtchens, 592 P.2d 158, 161 (Mont. 1979) (stating that in constru- 
ing the civil rule on form motions, this court has frequently stated 
that a motion is an application for an order); State ex rel. Gage v. 
District Court of the Second Judicial District, 419 P.2d 746, 748 
(Mont. 1966) (stating that a motion is an application for an order); 
State v. Wise, 419 P.2d 342, 344 (Ariz. 1966) (stating that the pur- 
pose of a motion is to obtain a ruling or an order directing that 
some act be done in favor of the applicant, and it should call to the 
attention of the court the particular purpose sought to be achieved, 
so that the court be given an opportunity to rule on the matter); 
Williams v. Denning, 133 S.E.2d 150, 151 (N.C. 1963) (per curiam) 
(stating that, under G.S. § 1-578, a motion is an application for an 
order); State v. James, 347 S.W.2d 211, 216 (Mo. 1961) (stating that 
a motion is an application made to a court or judge for the purpose 

52 

of obtaining a ruling or order directing some act be done in favor of 
the applicant); McClinton v. Rice, 265 P.2d 425, 428 (Ariz. 1953) 
(stating that the purpose of a motion is to obtain a ruling or an 
order directing that some act be done in favor of the applicant, and 
the essentials of a motion are that the attention of the court must 
be called to the particular matter or request, and that the court be 
given an opportunity to rule as to the matter); State ex rel. McVay 

v. District Court of Fourth Judicial District, 251 P.2d 840, 845 
(Mont. 1952) (stating that, under R.C.M. 1947, s 93-8401, a motion 
is an application for an order); Iveson v. Second Judicial District 
Court, 206 P.2d 755, 759 (Nev. 1949) (stating that a motion is a 
proceeding directed to a court’s authority to act on a given subject; 
a motion is an application for an order); People v. Hornaday, 81 
N.E.2d 168, 170 (Ill. 1948) (stating that a motion is an application to 
the court); Paramount Publix Corp. v. Boucher, 19 P.2d 223, 225 
(Mont. 1933) (stating that a motion is merely “an application for an 
order” (section 9772, Rev. Codes 1921)); Brown v. Caldwell, 16 
P.2d 139, 141 (Cal. 1932) (concluding that a statement of respon- 
dent’s counsel that he intended to ask for an instructed verdict was 
not a motion for an instructed verdict; a motion is an application 
for an order (section 1003, Code of Civil Procedure), and counsel’s 
statement of what he intended to do was not an application for an 
order); People v. Brickey, 178 N.E. 483, 484 (Ill. 1931) (stating that 
a motion is an application to the court); Harris v. Chicago House- 
Wrecking Co., 145 N.E. 666, 669 (Ill. 1924) (stating that a motion is 
an application made to a court for a rule or order); Genardini v. 
Kline, 190 P. 568, 570 (Ariz. 1920) (stating that a motion is an appli- 
cation made to a judge or the court for the purpose of obtaining a 
rule or order directing some act to be done in favor of the 
applicant); State v. Warner Valley Stock Co., 137 P. 746, 747 (Or. 
1914) (stating that in legal proceedings a motion is an application 
by a party to an action or suit for some kind of relief, that a motion 
should state what relief the mover desires and the reasons or 
grounds for asking for the relief, and that it is the duty of the party 
who asks for relief by motion to point out specifically what he 
desires); Hammer v. Campbell Automatic Safety Gas Burner Co., 
144 P. 396, 398 (Or. 1914) (stating that a motion is an application to 
the court for relief of some kind and it should state what relief is 
desired, and usually, it should state the grounds for asking for the 
relief demanded); Taylor v. Woodbury, 120 P. 367 (Kan. 1912) (stat- 

53 

apply to motions filed in administrative proceedings, 
parties in administrative proceedings have an obliga- 
tion to identify and frame applications or requests for 
rulings so that they are recognizable as such by 
administrative law judges. Petitioner’s statement in 
Petitioner’s Opposition to Respondent’s Motion to Dis- 
miss is neither identified nor framed as an application 
for a ruling. I do not find that the ALJ erred by failing 
to exercise his authority under section 900.59(a)(2) of 
the Rules of Practice (7 C.F.R. § 900.59(a)(2)) to rule on 
Petitioner’s putative motion for leave to amend its 
Petition, which putative motion is in the form of a state- 
ment rather than an application or request for a ruling. 

ing that under Kansas civil code a motion is defined as an appli- 
cation for an order addressed to the court or a judge in vacation); 
Brownell v. Superior Court of Yolo County, 109 P. 91, 94 (Cal. 
1910) (stating that a motion is an application for an order); Arnold 

v. Regan, 69 A. 292 (R.I. 1908) (per curiam) (stating that a motion 
is a request to the court to grant the mover some right to which he 
claims); Williams v. Hawley, 77 P. 762, 763 (Cal. 1904) (stating that 
a motion is an application for an order); Reid v. Fillmore, 73 P. 849, 
850 (Wyo. 1903) (stating, by our Code of Civil Procedure, a motion 
is defined to be “an application for an order addressed to a court or 
judge by a party to a suit or proceeding, or one interested 
therein”); McGuire v. Drew, 23 P. 312, 314 (Cal. 1890) (stating that, 
under section 1003 of the Code of Civil Procedure, an application 
for an order is a motion). 

54 

For the foregoing reasons, the following Order 
should be issued. 

V. Order 

The relief requested by Petitioner is denied and the 
Petition is dismissed with prejudice. 

Done at Washington, D.C. 

March 4, 1998 

/s/ WILLIAM G. JENSON 

WILLIAM G. JENSON 
Judicial Officer 

55 

UNITED STATES DISTRICT COURT 
FOR THE WESTERN DISTRICT OF TENNESSEE 
EASTERN DIVISION 

Civil Action No. 1-96-1252 

UNITED STATES OF AMERICA, PLAINTIFF 

v. 

UNITED FOODS, INC., DEFENDANT 

COMPLAINT 

The United States of America brings this civil action 
under the provision of the Mushroom Promotion, Re- 
search, and Consumer Information Act of 1990, as 
amended (hereinafter referred to as “the Act”), 7 
U.S.C. 6107(a), vesting the several District Courts of 
the United States with jurisdiction specifically to en- 
force, and to prevent and restrain any person from 
violating, any order or regulation issued by the Secre- 
tary of Agriculture under the authority contained in the 
Act, and alleges as follows: 

1. Jurisdiction is conferred on this Court by 7 U.S.C. 
6107(a) 

2. Venue lies in this Court pursuant to 28 U.S.C. 
§ 1391 (b) and (c), inasmuch as the defendant resides 
and has its offices and principal place of business in this 
judicial district. 

56 

3. The plaintiff is the United States of America, 
initiating this action as authorized under 7 U.S.C. 6107. 

4. The defendant United Foods, Inc., is a corporation 
organized and existing under the laws of the State of 
Delaware, and doing business as Pictsweet Mushroom 
Farms. Its offices and principal place of business are 
located at 10 Pictsweet Drive, Bells, Tennessee 38006- 
0119, within the Western District of Tennessee. 

5. This action is brought to enforce the provisions of 
the Act and the Mushroom Promotion, Research, and 
Consumer Information Order (hereinafter “the Order”), 
7 C.F.R. 1209.1-1209.77, and the regulations there- 
under, 7 C.F.R. 1209.200-1209.280, issued pursuant to 
the provisions of the Act. 

6. The Order and regulations are administered by 
the Mushroom Council, which is composed of mushroom 
producers and importers appointed by the Secretary of 
Agriculture, and whose function is to conduct the day 
to day operations set forth in the Act, Order and 
regulations. 7 U.S.C. 6102(3), 6104(b) and 7 C.F.R. 
1209.4, 1209.30-.35 (establishing the Mushroom 
Council); 7 U.S.C. 6104(c)-(f), 7 C.F.R. 1209.38-.50 
(powers and duties of the Mushroom Council). 

7. As part of its duties, the Mushroom Council 
develops, recommends to the Secretary of Agriculture 
for approval, and administers projects for mushroom 
promotion, research, consumer information and indus- 
try information. 7 U.S.C. 6104(c)(4), 6101 (b); 7 C.F.R. 
1209.38 (a), (b), (c), (j), 1209.39 (b), (1), 1209.40. 

57 

8. Funds for both these projects and the admini- 
strative expenses of the Mushroom Council are 
generated by levying assessments on producers and 
importers of mushrooms based on the poundage of 
mushrooms marketed for fresh use in the United 
States. 7 U.S.C. 6101(b), 6104(g)(1), (3) and 7 C.F.R. 
1209.50(b), 1209.51. First handlers of domestically pro- 
duced mushrooms are required to collect and remit the 
assessments levied on their producers and levied on 
their own production. 7 U.S.C. 6102 (5), 6104 (g) (1), (3); 
7 C.F.R. 1209.51(a), (c), 1209.251 (a), (b) . 

9. Pursuant to 7 U.S.C. 6104 and 7 C.F.R. 
1209.50(a) (1), the Mushroom Council annually recom- 
mends to the Secretary of Agriculture a budget for its 
projects and administrative expenses and a proposed 
rate of assessment to fund that budget. 

10. After approval by the Secretary of Agriculture, 
and in accord with the limits in 7 U.S.C. 6104(g)(2), an 
assessment rate of $.0045 per pound was duly adopted 
for mushrooms produced or imported after February 1, 
1996. 

11. Pursuant to the Act, Order, and regulations, first 
handlers, including marketing producers, are also 
required to file monthly reports detailing, inter alia, 
the number of pounds of assessable mushrooms and the 
amount of assessments remitted. 7 U.S.C. 6104(i)(1); 7 
C.F.R. 1209.60, 1209.260. 

12. At least since the inception of reporting and 
assessment collection under the Act and Order on 
August 1, 1993, defendant United Foods, Inc., doing 
business as Pictsweet Mushroom Farms, has been and 

58 

is a producer and first handler of mushrooms subject to 
assessments and monthly reporting under the Act, 
Order and regulations. 

13. Defendant United Foods, Inc., has not filed 
monthly reports or remitted assessments due for May 
and June 1996, and has advised the Mushroom Council 
that it does not intend to file any further reports or 
remit assessments. Based on the average of its un- 
audited first handler reports for the previous twelve 
months, it is estimated that the amount of assessments 
due is at least $8,000 per month, exclusive of interest. 

14. Defendant United Foods, Inc., is violating the 
Act, Order, and regulations by failing and refusing to 
file first handler reports and pay assessments when due 
and will continue to do so until appropriate relief is 
granted pursuant to 7 U.S.C. 6107(a) . 

15. Defendant’s failure to file first handler reports 
and pay its assessments has caused and will cause 
injury and irreparable harm to the operation of the 
Order and is detrimental to the public interest. Defen- 
dant’s violations of the Act and the Order threaten the 
entire scheme of the Order, by causing unfairness to 
those producers and first handlers who are in com- 
pliance with the order and by encouraging wider 
noncompliance with that Order. 

WHEREFORE, the United States respectfully re- 
quests that this Court: 

1. Issue both temporary and permanent mandatory 
injunctions commanding the defendant, its officers, 
agents, employees, successors, assigns and all other 

59 

persons in concert or participation with it to comply 
fully with the Act and all provisions of the Order and 
the regulations thereunder, now in effect and as they 
subsequently may be amended, and particularly to: 

(a) File forthwith with the Mushroom Council 
all first handler reports now due; 

(b) Pay forthwith to the Mushroom Council all 
assessment obligations now due, including late payment 
charges and interest thereon pursuant to 7 C.F.R. 
1209.51(g) and 1209.251 (e), (f); and 

(c) File with the Mushroom Council all future 
first handler reports and pay to the Mushroom Council 
all future assessment obligations when due, including 
those which accrue during the pendency of this action, 
pursuant to the provisions of the Act, the Order, and 
the regulations issued thereunder. 

2. Issue both temporary and permanent mandatory 
injunctions preventing and restraining the defendant, 
its officers, agents, employees, successors, assigns and 
all other persons in concert or participation with it from 
violating the Act and all provisions of the Order and the 
regulations thereunder now in effect and as they 
subsequently may be amended. 

3. Retain jurisdiction of this action for the purposes 
of entering such other, further and different orders and 
judgments as may be necessary in order to give full 
relief herein. 

4. Grant plaintiff its cost of this action. 

60 

Respectfully submitted, 

VERONICA F. COLEMAN 

United States Attorney 

/s/ BRIAN J. QUARLES 

BRIAN J. QUARLES 
Assistant United States Attorney 
Suite 800, 167 North Main Street 
Memphis, Tennessee 38103-1898 
(901) 544-4231 
(Tennessee BPR# 17142) 

61 

UNITED STATES DISTRICT COURT 
WESTERN DISTRICT OF TENNESSEE 
EASTERN DIVISION 

CIVIL ACTION NO. 1-98-1082 

UNITED FOODS, INC., PLAINTIFF 

v. 

UNITED STATES OF AMERICA, THE UNITED STATES 
DEPARTMENT OF AGRICULTURE, DEFENDANT 

[Filed: Mar 23, 1998] 

COMPLAINT FOR REVIEW OF AGENCY ACTION 
AND FOR DECLARATORY RELIEF 

United Foods, Inc. (“United Foods”), for its Com- 
plaint against the United States of America, The 
United States Department of Agriculture (the 
“U.S.D.A.”), states as follows: 

PARTIES 

1. United Foods is a corporation organized and 
existing under the laws of the State of Delaware. Since 
1987, United Foods has been and is a producer and first 
handler of mushrooms doing business as Pictsweet 
Mushroom Farms. United Foods’ offices and principal 
place of business are located in Bells, Tennessee, within 
the Western District of Tennessee. 

62 

2. The U.S.D.A. is the agency in charge of the 
Mushroom Promotion, Research and Consumer Infor- 
mation Act of 1990, as amended, 7 U.S.C. §§ 6101-6112 
(hereinafter the “Mushroom Law”). 

NATURE OF THIS ACTION 

3. On June 25, 1996, United Foods filed with the 
U.S.D.A. a petition under the Mushroom Law, pursuant 
to 7 U.S.C. § 6106(a), alleging that the Mushroom Law 
and assessments pursuant to the Mushroom Law 
violate United Foods’ rights to freedom of speech and 
freedom of association guaranteed under the First 
Amendment of the Constitution of the United States 
and United Foods’ right to equal protection under the 
Fifth Amendment to the Constitution. 

4. On March 4, 1998, the U.S.D.A. entered a Decision 
and Order denying the relief requested by United 
Foods and dismissing United Foods’ petition. 

5. United Foods is bringing this action pursuant to 
7 U.S.C. § 6106(b). In this action, United Foods is chal- 
lenging and is requesting this Court to review the 
Decision and Order by the U.S.D.A. 

JURISDICTION AND VENUE 

6. This Court has jurisdiction pursuant to 7 U.S.C. 
§ 6106(b) of the Mushroom Law, which authorizes the 
District Court to review any decision by the Secretary 
of the U.S.D.A. following the Secretary’s decision on a 
petition filed pursuant to 7 U.S.C. § 6106(a). This Court 
also has jurisdiction pursuant to 5 U.S.C. §§ 702 
through 706 which provides jurisdiction to the District 
Courts to review agency actions. 

63 

7. This Court also has jurisdiction pursuant to 28 
U.S. C. §§ 2201 and 2202 in order to declare the rights 
and obligations of United Foods and the U.S.D.A. in 
administrative proceedings brought pursuant to 
7 U.S.C. § 6106. 

8. Venue is appropriate in this District because 
United Foods does business within this District. 
7 U.S.C. § 6106(b)(1). 

FACTUAL BACKGROUND 

9. United Foods began approximately fifty years 
ago processing and selling frozen foods. United Foods 
processes, markets and distributes a full line of frozen 
vegetables. 

10. Pictsweet Mushroom Farms, a division of United 
Foods, began in 1987 to engage in the business of 
producing fresh mushrooms. Pictsweet Mushroom 
Farms is structured as three separate business units, 
with a mushroom farm in Ventura, California, one in 
Salem, Oregon, and one in Fillmore, Utah. 

11. Through its Pictsweet division, United Foods 
grows, markets and distributes more than 500,000 
pounds of fresh mushrooms per year. United Foods 
sells mushrooms in the retail, wholesale and food 
service channels of trade. 

12. Growing, marketing and distributing fresh 
mushrooms is a service-oriented business. 

13. Fresh mushrooms are not sold in a geographic 
market that is nationwide in scope. Because fresh 

64 

mushrooms have a short shelf life and are light weight, 
fresh mushrooms cannot be efficiently transported long 
distances. Consequently, fresh mushroom producers 
such as United Foods must sell their mushrooms within 
relatively small geographic regions surrounding the 
mushroom farms where the mushrooms are produced. 
In these respects, fresh mushrooms are unique as com- 
pared to most other agricultural products. 

14. Because of the nature of the fresh mushroom 
industry and the location of United Foods’ mushroom 
farms, United Foods sells its mushrooms in three sepa- 
rate regional markets: (i) Southern California and 
Arizona; (i) [sic] the Pacific Northwest; and (iii) the 
Central Rocky Mountain States. 

15. The regional markets for fresh mushrooms are 
self-contained. The supply of fresh mushrooms in a 
regional market, and the market prices for those 
mushrooms, are determined primarily by factors that 
exist within that regional market. Supply and market 
prices for fresh mushrooms within a regional market 
are less affected by producers or other factors that 
exist outside that regional market. 

16. Within each regional market for fresh mush- 
rooms, market prices are sensitive to the quantity of 
fresh mushrooms that are produced in that market. In 
turn, as prices increase, the quantity of fresh mush- 
rooms that are produced in that market will increase, 
such that prices will stabilize through the operation of 
natural market forces. Producers in most regional 
markets have the capacity to increase or decrease 
production within a relatively short period of time, 

65 

approximately three (3) months, to respond to changes 
in market price. 

17. Fresh mushrooms are not a homogenous pro- 
duct: there are different varieties of fresh mushrooms; 
different producers offer different kinds and levels of 
service in connection with the marketing of their fresh 
mushrooms; different producers use different kinds and 
styles of packaging for their fresh mushrooms; and the 
quality of fresh mushrooms sold by different producers 
is different. 

18. The primary customers of United Foods and 
other producers of fresh mushrooms are retail grocery 
outlets. In the regional markets where United Foods 
sells its fresh mushrooms, the retail grocery industry 
has been rapidly consolidating into a smaller number of 
larger grocery chains; and, therefore, the total number 
of United Foods’ customers within its fresh mushroom 
markets has become smaller. 

19. United Foods, like other fresh mushroom 
producers, engages in independent marketing activi- 
ties, at its own expense, that are geared towards the 
regional markets in which it sells its product. Because 
of the regional nature of the industry, fresh mushroom 
producers do not independently engage in nationwide 
marketing activities. 

20. To be successful, marketing efforts by United 
Foods or other fresh mushroom producers must accom- 
plish at least two objectives. First, the fresh mushroom 
producer must establish favorable relationships with 
the grocery stores in the region, and together the fresh 
mushroom producer and the grocery store must de- 

66 

velop customized marketing programs that are geared 
to the customer demands in the region and the unique 
qualities of the fresh mushrooms sold by the producer. 
Second, the fresh mushroom producer must advertise 
the distinguishing characteristics of the fresh mush- 
rooms which it produces. 

21. In 1990 Congress enacted the Mushroom Law, 7 
U.S.C. §§ 6101-6112. Pursuant to the Mushroom Law, 
the U.S.D.A. promulgated the Mushroom Promotion, 
Research, and Consumer Information Order at 7 C.F.R. 
§§ 1209.200-.280 (hereinafter, the “Mushroom Order”). 

22. The Mushroom Order provides for the formation 
of a Mushroom Council, which is a committee of 
competitors of United Foods appointed by the Secre- 
tary of Agriculture. The Mushroom Council exists to 
develop industry-wide (i.e. nationwide) promotion, 
research and consumer information programs for 
mushrooms, ostensibly to stimulate the demand for 
fresh mushrooms. See 7 U.S.C. § 6104(c)(4), 6101(b); 
7 C.F.R. § 1209.38(a), (b), (c), (j), (1), 1209.40. These are 
“generic” promotional programs in that they do not 
recognize the distinguishing characteristics of the 
different mushrooms and related services offered by 
the different mushroom producers. These programs 
also fail to recognize that mushroom markets are 
regional in nature, and that the effectiveness of differ- 
ent kinds of marketing and promotional techniques will 
depend upon the types and quality of the mushrooms 
and services being offered and the regions in which the 
mushrooms and services are being sold. 

23. Funds for the generic promotional and advertis- 
ing programs developed by the Mushroom Council are 

67 

generated by levying assessments on larger mushroom 
producers and importers of mushrooms, based upon the 
poundage of mushrooms marketed for fresh use in the 
United States. 7 U.S.C. § 6101(b), 6104(g)(1), (3); 7 
C.F.R. § 1209.50(b), 1209.51. Because United Foods 
produces and sells more than 500,000 pounds of fresh 
mushrooms per year, United Foods is subject to the 
assessments of the Mushroom Council. 

24. The Mushroom Law contains “free-rider” pro- 
visions which exempt certain groups of mushroom 
producers from assessments for financing the Mush- 
room Council programs. These provisions permit the 
exempt mushroom producers to “free-ride” on the 
purported benefits of the promotional and advertising 
programs. For example, by definition, the Mushroom 
Law excludes assessments for the mushroom producer 
who sells less than 500,000 pounds of fresh mushrooms 
per year in the domestic market, 7 U.S.C. § 6102(11), or 
for producers who sell their product in the processed 
forms, including marinated, canned, frozen, cooked, 
blanched, dried, or “otherwise processed” forms. 7 
U.S.C. § 6102(9). The Mushroom Law also exempts 
from assessments mushrooms produced in the United 
States that are sold in the export market. 7 U.S.C. 
§ 6104(g)(4). 

25. The generic promotional and advertising pro- 
grams developed by the Mushroom Council have had no 
discernable effect on the different fresh mushroom 
markets in the United States or on consumer demand 
for fresh mushrooms. There are several reasons for 
this. Among other things: the funds generated through 
assessments are inadequate to promote fresh mush- 
rooms on a nation-wide scale; nation-wide advertising 

68 

and promotional program will be incapable of materially 
influencing consumer demand in the various unique 
regional markets that exist for fresh mushrooms; the 
Mushroom Council programs cannot assist producers 
like United Foods in providing better quality of product 
or service to customers, which is necessary to any 
successful marketing program; the Mushroom Council 
programs are incapable of distinguishing the fresh 
mushrooms and services offered by the different pro- 
ducers, which is also essential to any successful market- 
ing program; and the Mushroom Council programs, by 
definition, cannot regulate the regional markets for 
fresh mushrooms. 

26. United Foods is opposed to the general content 
of the Mushroom Council’s programs. The Mushroom 
Council’s programs portray fresh mushrooms as a 
homogenous product, which is not true. By portraying 
fresh mushrooms in this manner, the Mushroom Council 
delivers a message to the general public which is con- 
trary to the message United Foods attempts to deliver 
to its customers in its regional markets. United Foods, 
in its marketing programs, attempts to portray its fresh 
mushroom products as unique, which they are. The 
content of the Mushroom Council’s programs, therefore, 
runs contrary to the interests of United Foods. 

27. United Foods has also objected to the specific 
content of certain of the Mushroom Council’s programs. 
For example, United Foods objected to the Mushroom 
Council’s portrayal of mushrooms as an aphrodisiac, 
which United Foods felt was inaccurate and inappro- 
priate. 

69 

28. The Mushroom Law deals only with the 
advertising and promotion of mushrooms. The Mush- 
room Law does not purport to regulate the mushroom 
industry. For example, the Mushroom Law does not 
regulate price, size, pack, maturity, production levels, 
quotas, reserves, or any other matters that are de- 
signed to restrict competition and/or stabilize markets 
or prices. Rather, the Mushroom Law exists only for 
the purpose of compelling certain mushroom producers 
and handlers to fund advertising and promotional 
activities of the Mushroom Council. 

29. The Mushroom Law does not serve a legitimate 
governmental interest. 

30. The Mushroom Law and the Mushroom Order 
violate United Foods’ right to freedom of speech under 
the First Amendment of the United States Consti- 
tution, in that the Mushroom Order wrongfully compels 
United Foods to fund the speech of the Mushroom 
Council. This speech is objectionable to United Foods, 
this speech is contrary to the interests of United Foods, 
and this speech neither serves nor is ancillary to any 
legitimate economic or other governmental purpose. 

31. The Mushroom Law and the Mushroom Order 
violate United Foods’ right to freedom of association 
under the First Amendment of the United States Con- 
stitution, in that the Mushroom Order wrongfully com- 
pels United Foods to associate with the Mushroom 
Council and the other mushroom producers represented 
by the Mushroom Council. 

32. The Mushroom Law and the Mushroom Order 
violate United Foods’ right to equal protection under 

70 

the Fifth Amendment of the United States Consti- 
tution, in that certain mushroom producers are ex- 
empted from assessments to fund the advertising and 
promotional activities of the Mushroom Council, and 
there is no rational basis for the discriminatory 
treatment of the different classes of mushroom 
producers provided for under the Mushroom Law. 

PROCEDURAL AND LEGAL BACKGROUND 

33. On June 25, 1996, United Foods filed with the 
U.S.D.A. its administrative petition (MPRCIA Docket 
No. 96-001) challenging the constitutionality of the 
Mushroom Law and the Mushroom Order. 

34. On November 15, 1996, the Administrative Law 
Judge who was assigned to the case stayed the admini- 
strative proceeding because of the pending action by 
the United States Supreme Court in Cal-Almond, Inc. 

v. Department of Agric., 14 F.3d 429 (9th Cir. 1993), 67 
F.3d 874 (9th Cir. 1995), and Wileman Bros. & Elliott, 
Inc. v. Espy. Inc., 58 F.3d 1367 (9th Cir. 1995), cert. 
granted sub nom., Glickman v. Wileman Bros. & 
Elliott, Inc., 116 S.Ct. 1875 (1996). 

35. On June 25, 1997, the Supreme Court entered its 
decision in Glickman v. Wileman Bros. & Elliott, Inc., 
117 S.Ct. 2130 (1997), reh’d denied, 118 S.Ct. 25 (1997). 
The Supreme Court, in a 5 to 4 opinion, reversed the 
Ninth Circuit and held that compelled funding of 
generic advertising of California nectarines, plums, and 
peaches in accordance with certain Marketing Orders 
issued under the Agricultural Marketing Agreement 
Act of 1937 (the AMAA) was not unconstitutional. 

71 

36. On December 9, 1997, the Administrative Law 
Judge in United Foods’ administrative proceeding 
issued a Decision and Order of Dismissal which con- 
cluded that Wileman Bros., supra, was dispositive of 
the issues raised by United Foods in that proceeding. 

37. On January 14, 1998, United Foods appealed the 
Administrative Law Judge’s decision to the Judicial 
Officer to whom the Secretary of Agriculture has 
delegated authority to act as final deciding officer in the 
Department’s adjudicatory proceedings subject to 
5 U.S.C. §§ 556 and 557 (7 C.F.R. § 2.35). 

38. On March 4, 1998, the Judicial Officer issued a 
Decision and Order affirming the decision of the Ad- 
ministrative Law Judge. It is this Decision and Order 
which United Foods is hereby challenging and asking 
this Court to review. 

39. Contrary to the ruling by the Judicial Officer in 
the U.S.D.A. administrative proceeding, Wileman 
Bros., supra, is not dispositive of the constitutional 
claims asserted by United Foods, for the following 
reasons: 

(1) The First Amendment issue in Wileman 
Bros. arose in the context of a detailed regulatory 
scheme that restricts competition among California 
nectarine and peach growers in order to maintain 
stable marketing conditions for those agricultural 
products. 117 S.Ct. at 2134-35. The Court in Wile- 
man Bros. held, essentially, that generic adver- 
tising provisions that are ancillary to a broad and 
detailed marketing scheme designed to stabilize 
markets are not subject to traditional First 

72 

Amendment analysis. The Court noted that the 
regulatory scheme in Wileman Bros. has many 
collectivist goals unrelated to advertising, and ge- 
neric advertising in the context of that regulatory 
scheme is constitutionally justified because it serves 
the collectivist goals of the regulatory scheme. 

(2) The First Amendment issues in United 
Foods’ case, on the other hand, do not arise in the 
context of such a regulatory scheme. The Mush- 
room Law is free standing legislation with no 
regulatory intent except to collect assessments for 
promotion, advertising, and research. The Mush- 
room Law does not purport to restrict competition 
or to regulate the mushroom market. The Supreme 
Court in Wileman Bros. did not address the consti- 
tutionality of the kinds of compelled advertising and 
promotional activities that are at issue in United 
Foods’ case. 

(3) This distinction is central to the holding in 
Wileman Bros. The Supreme Court majority in 
Wileman Bros. made clear that its decision must be 
understood in the context of the statutory scheme 
in which the First Amendment issue arose in that 
case. The majority opinion said: 

The legal question that we address is whether 
being compelled to fund this advertising raises a 
First Amendment issue for us to resolve, or 
rather is simply a question of economic policy for 
Congress and the Executive to resolve. 

In answering that question we stress the 
importance of the statutory context in which it 
arises. California nectarines and peaches are 

73 

marketed pursuant to detailed marketing orders 
that have displaced many aspects of independent 
business activity that characterize other portions 
of the economy in which competition is fully 
protected by the antitrust laws. The business 
entities that are compelled to fund the generic 
advertising at issue in this litigation do so as 

part of a broader collective enterprise in which 
their freedom to act independently is already 
constrained by the regulatory scheme. It is in 

this context that we consider whether we should 
review the assessments used to fund collective 
advertising, together with other collective 

activities, under the standard appropriate for 
the review of economic regulation or under a 
heightened standard appropriate for the review 
of First Amendment issues. 

117 S. Ct. at 2138 (emphasis added). Later in the 
decision the Court said: 

Generic advertising is intended to stimulate 
consumer demand for an agricultural product in 
a regulated market. That purpose is legitimate 
and consistent with the regulatory goals of the 
overall statutory scheme. 

Id. at 2141 (emphasis added). And towards the end 
of its opinion, the majority said: 

In sum, what we are reviewing is a species of 
economic regulation that should enjoy the same 
strong presumption of validity that we accord to 
other policy judgments. 

74 

Id. at 2142. 

(4) The regulatory scheme at issue in Wileman 
Bros. was a “marketing order” promulgated under 
the Agricultural Marketing Agreement Act of 1937 
(AMAA), 7 U.S.C. § 601 et seq.. As the Court 
explained, “Marketing orders promulgated pur- 
suant to the AMAA are a species of economic 
regulation that has displaced competition in a 
number of discrete markets; . . .” Id. at 2134. The 
purpose of these marketing orders is to regulate 
and limit competition in order “to establish and 
maintain such orderly marketing conditions for 
[certain agricultural commodities] . . . as will 
provide . . . an orderly flow of the supply thereof 
to market throughout its normal marketing season 
to avoid unreasonable fluctuations in supplies and 
prices.” 7 U.S.C. § 602(4). These marketing orders 
may impose uniform prices in a particular market, 
limitations on the quality and quantity of the com- 
modity that may be marketed, determinations of 
grade and size of the commodity, and orderly 
disposition of any surplus that might suppress 
market prices. These marketing orders may also 
authorize joint research and development projects, 
inspection procedures, and standardized packaging 
requirements. Id.. See, e.g., 7 U.S.C. § § 602(4) and 
60c(6) . 

(5) Because the generic advertising provisions at 
issue in Wileman Bros. were contained within a 
broad and detailed regulatory scheme that re- 
stricted competition and required collective action 
in order to stabilize markets, the Court held that 
the Central Hudson test applied by the Ninth 

75 

Circuit was inappropriate. “The Court of Appeals’ 
decision to apply the Central Hudson test is 
inconsistent with the very nature and purpose of 
the collective action program at issue here.” Id. at 
2141. 

(6) By contrast, the Mushroom Law in United 
Foods’ case was not promulgated under the AMAA. 
Rather, it was promulgated pursuant to an entirely 
different statute, the “Mushroom Act” set forth in 
7 U.S.C. § 6101 et seq. The purpose of the “Mush- 
room Act” has nothing to do with regulating 
markets by restricting competition and requiring 
collective action in the production, distribution, and 
sale of certain products. Contrary to the AMAA, 
the sole purpose of the “Mushroom Act” is to 
compel mushroom producers to finance advertising 
and promotional programs developed by the 
Mushroom Council. The “Mushroom Act” was 
enacted in 1990 to create: 

[A]n orderly procedure for developing, 
financing through adequate assessments on 
mushrooms produced domestically or im- 
ported into the United States, and carrying 
out, an effective, continuous, and coordinated 
program of promotion, research, and 
consumer and industry information designed 
to— 

(1) strengthen the mushroom industry’s 
position in the marketplace; 

(2) maintain and expand existing 
markets and uses for mushrooms; and 

76 

(3) develop new markets and uses for 
mushrooms. 

7 U.S.C. § 6101(6). The advertising and promotional 
purposes of the “Mushroom Act” bear no resem- 
blance to the economic regulatory purposes of the 
AMAA. 

(7). Because the regulatory scheme involved in 
the Wileman Bros. case was fundamentally dif- 
ferent from the Mushroom Law at issue in United 
Foods’ case, the Supreme Court’s decision in Wile- 
man Bros. is not dispositive of the constitutional 
issues raised by United Foods. Indeed, Wileman 
Bros. assists United Foods’ position. The Supreme 
Court implied that but for the fact of an expansive 
regulatory scheme designed to stabilize markets, a 
generic advertising program would be unconsti- 
tutional. Because the Mushroom Law is neither 
designed nor intended to stabilize the mushroom 
market (it exists only to expand the market), its 
generic advertising program violates United Foods’ 
First Amendment rights. 

(8) In addition, in Wileman Bros. the Supreme 
Court did not address the equal protection issues 
that are present in United Foods’ case. In Wileman 
Bros. there was no discussion of the constitutional 
ramifications of creating the kinds of exemptions 
from assessments that exist under the Mushroom 
Law. 

WHEREFORE, United Foods prays for the following 
relief: 

77 

1. A judgment declaring that the Mushroom Law 
and the Mushroom Order violate United Foods’ 
constitutionally guaranteed rights to freedom of speech 
and freedom of association under the First Amendment 
of the United States Constitution and United Foods’ 
constitutionally guaranteed right to equal protection 
under the Fifth Amendment of the United States 
Constitution. 

2. A judgment invalidating assessments under the 
Mushroom Order and declaring that United Foods shall 
not be subject to any such past, present or future 
assessments. 

3. An Order granting United Foods a temporary and 
permanent injunction prohibiting the United States 
Department of Agriculture or the Mushroom Council 
from enforcing against United Foods any assessments 
under the Mushroom Law or the Mushroom Order. 

4. An award of attorneys’ fees and costs under the 
Equal Access to Justice Act. 

5. Such further relief as the Court deems appropri- 
ate. 

78 

Respectfully submitted: 

/s/ BRADLEY A. MACLEAN 

BRADLEY A. MACLEAN 
Bradley A, MacLean (B.P.R. #9562) 

FARRIS, WARFIELD & 
KANADAY, PLC 

Suite 1900, SunTrust Center 
424 Church Street 
Nashville, Tennessee 37219 
(615) 244-5200 

Attorney for United Foods, Inc. 

OF COUNSEL: 

Brian C. Leighton 
701 Pollasky 
Clovis, California 93612 
(209) 297-6190 

79 

PROGRAM 
ANNOUNCEMENT 

United States 
Department of Agriculture 

Agricultural Marketing Service 

Information Staff 
P.O. Box 96456 
Washington, D.C. 
20090-6456 
Release No. AMS-071-98 

Carol Blake (202) 720-8998 
cblake@usda.gov 
Billy Cox (202) 720-8998 
Billy_A_Cox@usda.gov 

MUSHROOM INDUSTRY VOTES TO CONTINUE 
PROMOTION PROGRAM 

WASHINGTON, March 20, 1998—The U.S. Depart- 
ment of Agriculture today announced that the 
mushroom industry has voted to continue the pro- 
motion, research, and consumer information program 
for fresh mushrooms. The program is authorized by the 
Mushroom Promotion, Research, and Consumer Infor- 
mation Act of 1990. USDA’s Agricultural Marketing 
Service conducted a referendum Feb. 24 - March 13. 

Dr. Enrique E. Figueroa, administrator of AMS, said, 
“The results of the referendum indicate that 80 percent 
of those who voted favored continuance of the order 

80 

and they represented 70 percent of the volume of mush- 
rooms produced by those who voted.” 

The program needed the approval of a majority of the 
voters who represented more than 50 percent of the 
volume of mushrooms produced and imported by those 
voting in the referendum. 

The program is administered by a council of nine 
industry representatives. The program is funded by an 
assessment rate of 0.45 of one cent per pound of mush- 
rooms paid by persons who annually produce or import 
an average of more than 500,000 pounds of mushrooms. 

# 

An electronic version of this news release can be 
obtained via the World Wide Web at: 
http://www.ams.usda.gov/news/newsrel.htm 

81 

UNITED STATES DEPARTMENT OF AGRICULTURE 
BEFORE THE SECRETARY OF AGRICULTURE 

MPRCIA Docket No. 95-1 

IN RE: DONALD B. MILLS, INC., 
A CALIFORNIA CORPORATION, 

D/B/A/ DBM MUSHROOMS, PETITIONER 

[Filed: Apr. 26, 1996] 

DECISION 

This is an administrative adjudicatory proceeding 
pursuant to 7 U.S.C. § 6106(a) in which Petitioner chal- 
lenges provisions of the Mushroom Promotion, Re- 
search, and Consumer Information Act of 1990, as 
amended, (7 U.S.C. §§ 6101-6112) (the “Act”), and the 
Mushroom Promotion, Research, and Consumer Infor- 
mation Order (7 C.F.R. §§ 1209.1-1209.77) (the “Or- 
der”). This proceeding was instituted by a Petition, 
filed on March 15, 1995, by Donald B. Mills, Inc., in 
which Petitioner alleged that the Act and order vio- 
lated provisions of the United States Constitution. 
Respondent, the Administrator of the Agricultural 
Marketing Service of the United States Department of 
Agriculture (“USDA” or the “Department”), filed an 
Answer on April 14, 1995, which denied that the Act or 
Order violated the Constitution. 

A hearing was held in San Francisco, California, on 
August 15-17, 1995. Petitioner was represented by 

82 

Brian C. Leighton, Fresno, California. Respondent was 
represented by Gregory Cooper, Office of the General 
Counsel, United States Department of Agriculture. 

The parties have submitted proposed findings, pro- 
posed conclusions, and numerous briefs. All proposed 
findings, proposed conclusions, and arguments have 
been considered. To the extent indicated, they have 
been adopted. Otberwise, they have been rejected as 
irrelevant or not supported by the evidence. In this 
opinion, “Tr.” refers to the transcript of the hearing; 
“PX” refers to the numbered exhibits offered by Peti- 
tioner; and “RX” refers to the numbered exhibits 
offered by Respondent. 

Statutory and Regulatory Background 

The Mushroom Promotion, Research, and Consumer 
Information Act was enacted in 1990 to create: 

[A]n orderly procedure for developing, financing 
through adequate assessments on mushrooms 
produced domestically or imported into the United 
States, and carrying out, an effective, continuous, 
and coordinated program of promotion, research, 
and consumer and industry information designed 
to— 

(1) strengthen the mushroom industry’s posi- 
tion in the marketplace; 

(2) maintain and expand existing markets and 
uses for mushrooms; and 

(3) develop new markets and uses for mush- 
rooms. 

83 

7 U.S.C. § 6101. 

12 

The Act provides for the establishment of an Order, 
7 U.S.C. § 6103, and of the Mushroom Council, 7 U.S.C. 
§ 6104(b), with power, inter alia: 

(1) to administer the order in accordance with its 
terms and provisions; 

. . . . 

12 The Act (7 U.S.C. § 6101(a)) contained the following findings: 

(1) mushrooms are an important food that is a valuable part of 
the human diet; 

(2) the production of mushrooms plays a significant role in the 
Nation’s economy in that mushroom are produced by hundreds 
of mushroom producers, distributed through thousands of 
wholesale and retail outlets, and consumed by millions of 

people throughout the United States and foreign countries; 

(3) mushroom production benefits the environment by effi- 
ciently using agricultural byproducts; 

(4) mushrooms must be high quality, readily available, han- 
dled properly, and marketed efficiently to ensure that the 
benefits of this important product are available to the people of 
the United States: 

(5) the maintenance and expansion of existing markets and 
uses, and the development of new markets and uses, for mush- 
rooms are vital to the welfare of producers and those con- 
cerned with marketing and using mushrooms, as well as to the 

agricultural economy of the Nation; 

(6) the cooperative development, financing, and implementa- 
tion of a coordinated program of mushroom promotion, 
research, and consumer information are necessary to maintain 
and expand existing markers for mushrooms; and 

(7) mushrooms move in interstate and foreign commerce, and 
mushrooms that do not move in such channels of commerce 
directly burden or affect interstate commerce in mushrooms. 

84 

(4) to propose, receive, evaluate, approve, and 
submit to the Secretary for approval under 
subsection (d) of this section budgets, plans, 
and projects of mushroom promotion, research, 
consumer information. and industry informa- 
tion, as well as to contract and enter into 
agreements with appropriate persons to imple- 
ment such plans or projects; 

. . . . 

(6) to receive, investigate, and report to the 

Secretary complaints of violations of the order 

. . . . 

7 U.S.C. § 6104(c). 

Assessments at a rate of $.0025 per pound, 7 U.S.C. 
§ 6104(g)(2), are levied on mushroom producers and 
importers, 7 U.S.C. § 6104(g)(1). First handlers are re- 
quired to collect such assessments from their producers 
and to remit the collected assessments to the Council. 
7 U.S.C. § 6104(g)(1)(A). 

Three categories of mushrooms or producers are 
excluded from assessments. First, assessments under 
the Act only apply to mushrooms “. . . grown within 
the United States for the fresh market, or imported 
into the United States for the fresh market, that are 
marketed. . . .” Thus, the Act specifically excludes 

“. . . mushrooms that are commercially marinated, 
canned, frozen, cooked, blanched, dried, packaged in 
brine, or otherwise processed, as may be determined by 
the Secretary.” 7 U.S.C. § 6102(9). Second, assess- 
ments under the Act only apply to producers and im- 
porters who produce or import “. . . on average, over 

85 

500,000 pounds of mushrooms” annually for the fresh 
market. 7 U.S.C. §§ 6102(6) and (11). Third, assess- 
ments under the Act do not apply to exported mush- 
rooms. 7 U.S.C. § 6104(g)(4). 

Findings of Fact 

1. Petitioner, Donald B. Mills, Inc., is a producer 
and first handler of mushrooms. Petitioner grows 
approximately three million pounds of mushrooms per 
year, with approximately 75% of them going to the 
fresh market (Tr. 729-30). 

2. Petitioner’s market is in Oakland, south San 
Francisco, and San Francisco (Tr. 727). 

3. Pictsweet Mushroom Farms is one of the largest 
fresh mushroom producers in the United States. Picts- 
weet began operating in 1987, and its sales have 
increased every year (Tr. 595, 600-01). 

4. Official government statistics indicate that in 
1966, 75% of mushrooms produced in the United States 
were used for processing and 25% for fresh use. By 
1993, 69% went for fresh use and only 31% went for 
processing (RX 69, p. 15). 

5. In 1992-1993, total United States production of 
mushrooms for fresh use was valued at $537,922,000 
(RX 69, pp. 12, 20). Exports of fresh mushrooms 
peaked in 1990, totaling approximately $22,000,000 (RX 
43, p. 29). 

6. United States per capita fresh mushroom con- 
sumption is far below that of Canada and other 
Western European nations (RX 43, pp. 7, 9). 

86 

7. In 1993-1994, there were approximately 355 
producers and 520 million pounds of mushrooms for 
fresh use (RX 69, pp. 9, 15). 

8. Mushrooms are grown commercially in many 
states (RX 69, p. 20, n. 5). However, 43% are produced 
in Pennsylvania and 17% are produced in California (Tr. 
328-29). Less than 1% of the domestic fresh mushroom 
market is from imports (RX 24, p. 1). 

9. There is not an over supply of mushrooms but an 
adequate supply (Tr. 276). 

10. Mushrooms are not a homogeneous product be- 
cause there are different varieties, there are different 
levels of service that are attached to all mushrooms 
that make their value different, there are different 
packaging types and styles, and the quality is very 
different (Tr. 658-60). 

11. Mushrooms are impulse items, i.e., they are not 
an essential part of the consumer’s life and their diet. 
Therefore, if the product does not look good, the 
consumers will not buy it (Tr. 660). Produce managers 
of grocery stores and grocery chains buy based upon 
consumer demand (Tr. 736). 

12. Mushrooms have very little nutritional value (Tr. 
327-28, 514). 

13. Selling of fresh mushrooms must be in a very 
regional market because mushrooms cannot be shipped 
long distances and have an extremely short shelf life 
(Tr. 601). 

14. On a national basis, there is no one company or 
companies that have a monopoly or oligopoly because of 

87 

the regional nature of the business, but regionally the 
opposite is true, where only a few producers control the 
market (Tr. 660-63). 

15. The Mushroom Order became effective on 
January 8, 1993 (RX 27), and the Mushroom Council 
was first seated on June 24, 1993 (RX 60, p. 1). 

16. The strategic plan of the Mushroom Council is to 
increase per capita consumption of mushrooms (Tr. 515- 

16). From 1970 through 1993, total mushroom con- 
sumption increased every year (Tr. 394), although per 
capita consumption decreased in the 1990’s after having 
increased in the 1980’s (Tr. 190; RX 43, p. 7). 

17. The Mushroom Council began collecting assess- 
ments from mushroom producers and importers on 
August 1, 1993 (Tr. 200). 

18. Assessments under the Mushroom Promotion, 
Research, and Consumer Information Act and the 
Mushroom Promotion, Research, and Consumer Infor- 
mation Order are levied on fresh mushroom producers 
and importers at a rate of $.0025 per pound. Assess- 
ment reports and checks are submitted monthly (Tr. 
257). 

19. Only producers or importers averaging over 
500,000 pounds annually for the fresh domestic market 
are subject to assessments. One hundred fifty-two 
mushroom producers in the United States are subject 
to assessments as they each produce over 500,000 
pounds of mushrooms for the fresh domestic market 
(Tr. 329). In 1995, the Mushroom Council collected 
assessments from these 152 producers encompassing 

88 

515-518 million pounds of mushrooms for fresh use (Tr. 
252). 

20. Fifty-nine fresh mushroom producers have filed 
exemptions with the Mushroom Council claiming that 
they produce 500,000 pounds or less of fresh mush- 
rooms annually for the domestic market and are there- 
fore exempt from assessments (Tr. 329). 

21. Mushrooms for export and mushrooms for pro- 
cessing are excluded from the program. 

22. Many fresh mushroom producers engage in 
individual promotion program that increase consump- 
tion (Tr. 730-31, 740-41, 750-56). 

23. In 1995, the Mushroom Council had a budget of 
$1.3 million (Tr. 197). This is an extremely small budget 
(Tr. 127, 393). There are essentially three parts to the 
Council’s promotion program: retail merchandising 
promotion, consumer publicity and education, and food 
service promotion (Tr. 229). 

24. The Mushroom Council’s president and public 
relations director have engaged in an aggressive, 
imaginative campaign of advertising and promotion. 
This has included preparation of press releases, articles, 
brochures, kits, and photographs which are distributed 
to newspapers, radio stations, retailers, consumers, and 
even schools. These materials are attractive and 
informative. Much free publicity has been obtained as a 
result of the Council’s efforts. 

25. Econometric modeling is a precise method of 
measuring the effectiveness of a promotion program 
(Tr. 28-29). The Mushroom Council’s Program cannot 

89 

be measured econometrically because it began mainly 
in 1995, and several years data is necessary to conduct a 
complete analysis (Tr. 32-33, 103). 

26. Neither the Mushroom Council nor any of the 
firms that it has employed have done any study to 
determine whether or not the Council’s programs have 
increased demand for mushrooms (Tr. 299-301). 

27. None of the promotional and educational pro- 
grams engaged in by the Mushroom Council has re- 
vealed any increase in consumption, price, or demand 
for mushrooms (Tr. 294, 324, 517-18, 522-25, 642-44, 648- 
49, 740-51). 

Discussion 

First Amendment Analysis 

I. The Criteria to be Applied 

Petitioner argues that two decisions of the United 
States Court of Appeals for the Ninth Circuit apply to 
this case and, based upon those decisions, the Mush- 
room Promotion Program established by USDA vio- 
lates the First Amendment of the United States 
Constitution and is, therefore, unconstitutional. The 
cases are Wileman Bros. v. Espy, 58 F.3d 1367 (9th Cir. 
1995) and Cal-Almond v. United States Dep’t of Agric., 
14 F.3d 429 (9th Cir. 1993). Respondents argues that 
these cases do not apply to the facts at hand, are 
incorrectly decided, and should not be followed. 

13 

13 USDA filed a petition for a writ of certiorari in the United 
States Supreme Court in Wileman (Jan. 24, 1996). 

90 

The Ninth Circuit held that the government’s generic 
advertising programs for California peaches, nectar- 
ines, and plums in Wileman and for almonds in Cal- 
Almond were invalid because they did not comply with 
a three-part test enunciated by the Supreme Court in 
Central Hudson Gas & Elec. Corp. v. Public Serv. 
Comm’n, 447 U.S. 557 (1980). 

In Central Hudson, the Supreme Court held that 
“[t]he First Amendment, as applied to the States 
through the Fourteenth Amendment, protects commer- 
cial speech from unwarranted governmental regula- 
tion.” Central Hudson, 447 U.S. at 561. If commercial 
speech is neither misleading nor related to unlawful 
activity, restrictions on such speech must: 1) implement 
a substantial government interest; 2) directly advance 
that interest; and 3) be narrowly tailored to achieve the 
desired objective. See Board of Trustees v. Fox, 492 
U.S. 469 (1989). 

In accordance with the decisions of the Ninth Circuit 
in Cal-Almond and Wileman, I find that the Mushroom 
Promotion Program in this case does not satisfy the 
Supreme Court’s three-part Central Hudson test. 
Although there is a substantial government interest in 
connection with the Mushroom Program, the program 
does not directly advance that interest and is not 
sufficiently narrowly tailored. 

A. Substantial Government Interest 

Congress stated that the mushroom legislation was 
passed to “strengthen the mushroom industry’s posi- 
tion in the market place,” “maintain and expand exist- 
ing markets . . .” and “develop new markets and uses 
for mushrooms.” 7 U.S.C. § 6101. The Ninth Circuit 

91 

has held that there is a substantial and legitimate 
government interest in creating effective mandatory 
cooperative promotion and information programs to 
stimulate market demand for the financial benefit of the 
producers in the peach and nectarine industry in 
Wileman and the almond industry in Cal-Almond. The 
court in Cal-Almond required no specific analysis of the 
almond industry or its profitability trends before it 
concluded: “We agree that stimulating the demand for 
almonds in order to enhance returns to almond pro- 
ducers and stabilize the health of the almond industry is 
a substantial state interest.” Cal-Almond, 14 F.3d at 
437. 

Similarly, the court in Wileman endorsed the same 
conclusion although there was absolutely no evidence 
suggesting that the treefruit industry was in any 
distress that required rescuing. Wileman Bros. & 
Elliott v. Espy, 58 F.3d 1367, 1378 (9th Cir. 1995). 

I find, therefore, that the government’s interest in 
promoting and expanding the mushroom industry is 
substantial. 

B. Direct Advancement 

The court in Cal-Almond stated, “As a starting point 
for our analysis, therefore we must determine how 
effective the Board’s own almond promotion efforts 
are.” Cal-Almond, 14 F.3d at 437. 

A court will not merely assume that the legislative 
program will always advance the asserted state inter- 
est sufficiently to justify its abridgment on commercial 
free speech. City Council v. Taxpayers for Vincent, 

92 

466 U.S. 789, 803 n. 22 (1984). As the court held in 

Rubin v. Coors Brewing Co., 115 S. Ct. 1585, 1592 
(1985), 

In Edenfield, we decided that the Government 
carries the burden of showing that the challenged 
regulation advances the Government’s interest ‘in a 
direct and material way.’ Id., at ___, 113 S. Ct., at 
1798. That burden ‘is not satisfied by mere specu- 
lation and conjecture; rather, a governmental body 
seeking to sustain a restriction on commercial 
speech must demonstrate that the harms it recites 
are real and that its restriction will in fact alleviate 
them to a material degree.’ (internal citation 
omitted). 

The Supreme Court assumes as a matter of law that 
advertising increases consumption of the product being 
advertised. See, e.g., Wileman, 58 F.3d at 1378; Cal- 
Almond, 14 F.3d at 439; Posadas de Puerto Rico Assoc. 

v. Tourism Co. of Puerto Rico, 478 U.S. 328, 342 (1986). 
As stated by the Ninth Circuit in Wileman, “the ques- 
tion is whether the mandatory generic advertising pro- 
gram sells the product more effectively than the ‘spe- 
cific, targeted marketing efforts of individual han- 
dlers.’ ” Wileman, 58 F. 3d at 1378 (citing Cal-Almond, 
14 F.3d at 439). 

In Cal-Almond, almond handlers presented evidence 
that the assessments collected by the Almond Board 
hindered their own advertising efforts. Because the 
Secretary could not provide evidence that the generic 
advertising program was more effective at promoting 
almonds than the individual efforts of the handlers, the 

93 

Ninth Circuit held that the Almond Board’s advertising 

and promotion program did not directly advance the 
government’s interest: 

We agree with [the handlers’] argument that each 
handler knows best how to sell his own almonds; we 
are unwilling to presume, in the absence of hard 
evidence to the contrary, that a government agency 
is better at marketing than an individual business- 
person. 

Cal-Almond, 14 F.3d at 439. 

Similarly, in Wileman, the Ninth Circuit stated: 

[T]he Secretary has demonstrated that advertising 
increases consumption of peaches and nectarines but 
has not gone the necessary next step of demon- 
strating that the generic advertising program is 
better at increasing consumption than individualized 
advertising, as Cal-Almond requires. Thus, the ge- 
neric advertising programs for peaches and nectar- 
ines do not “directly advance” the government’s in- 
terest and fail the second prong of the Central Hud- 
son test. 

Wileman, 58 F.9d at 1379. 

Petitioner contends that “there is absolutely no evi- 
dence presented by the government that the Mushroom 
Council’s mandatory assessment program for promo- 
tion, education and advertising has substantially in- 
creased [the] government interest [in increasing sales 
of mushrooms].” (Petitioner’s Brief at 16). This point is 
confirmed by Respondent’s witnesses and other evi- 

94 

dence. Wade Whitfield, the president and CEO of the 
Mushroom Council since October 1, 1993, testified that 
neither the Council nor any of the firms that it has 
employed have done any study to determine whether or 
not the Council’s programs have increased demand for 
mushrooms (Tr. 299-301). Similarly, Robyn Wilk, the 
Mushroom Council’s public relations director, testified 
that the Mushroom Council has no information that any 
of the programs completed is 1995 have increased the 
consumption or sale of mushrooms (Tr. 517-18). Addi- 
tionally, John Haltom, president of Pictsweet Mush- 
room Farms, another mushroom producer, and also 
treasurer of the Mushroom Council, testified that he 
has seen no measurable improvement and no impact 
from the Council’s promotional and educational re- 
search efforts (Tr. 642-44). 

In 1995, the Mushroom Council had a budget of $1.3 
million (Tr. 197). There were three main categories of 
spending by the Council in 1995: 1) retail merchandising 
promotion; 2) consumer publicity and education; and 3) 
food service promotion (Tr. 229). 

The efforts of the Mushroom Council are impressive 
and commendable. For example, a “color page” adver- 
tisement was prepared for newspapers with mushroom 
photography, facts, and recipes, and has, to date, been 
run in more than 160 newspapers (Tr. 227, 498; RX 74, 
items 3-5; RX 75). The page won an award as one of the 
top 20 pages of the year (Tr. 525-26). In addition, the 
Council distributed the “Blueprint for Profit,” a retail 
kit with a shelf layout schematic, care and handling 
cards for consumers, and a full color chart for produce 
clerks showing varieties, uses, flavors, and handling 
requirements, to half of the country’s supermarkets and 

95 

1,500 smaller stores (Tr. 230, 236-45; RX 72, items 5, 6). 
The Council also developed a comprehensive education 
program to help raise children’s preferences for mush- 
rooms (Tr. 452-54; RX 58, pp. 6, 8). 

Econometric modeling is a precise method of mea- 
suring the effectiveness of a promotion program. The 
mushroom industry cannot be measured econometri- 
cally because the program is relatively new, and several 
years’ data are necessary to conduct a complete analy- 
sis (Tr. 32-33, 103). Thus, although the public relations 
and educational programs run by the Council were 
performed very well, the Council has seen no 
measurable benefit in increased sales of mushrooms as 
a result of those programs (Tr. 648-49). 

The Department has demonstrated that advertising 
increases consumption of mushrooms. However, the 
Department has not shown that the efforts of the 
Mushroom Council are better at increasing consump- 
tion than the individual efforts of the mushroom 
handlers. None of the government witnesses could 
substantiate that any part of their program increased 
sales of, demand for, or the price of mushrooms, nor 
could they show that new markets had been expanded, 
new uses had been found, or that the program 
strengthened the mushroom industry’s position in the 
marketplace (Petitioner’s Brief at 17). Thus, the Mush- 
room Council’s program has not “directly advanced” the 
government’s interest and fails the second part of the 
Central Hudson test. 

C. Narrowly-Tailored 

Respondent contends that the Mushroom Council’s 
program has been properly designed based on exten- 

96 

sive research, testing, and accepted promotional tech- 
niques and is sufficiently narrowly tailored to promote 
mushroom sales. Respondent must also demonstrate 
that the Mushroom Order and Regulations are no more 
extensive than necessary to serve the interest of pro- 
moting mushroom sales. In Board of Trustees of State 
Univ. v. Fox, 492 U.S. 469, 480 (1989), the Supreme 
Court held that this standard is not as strict as a “least 
restrictive means” test: 

What our decisions require is a “ ‘fit’ between the 
legislature’s ends and the means chosen to accom- 
plish those ends,”—a fit that is not necessarily per- 
fect, but reasonable; that represents not necessarily 
the single best disposition but one whose scope is “in 
proportion to the interest served”; that employs not 
necessarily the least restrictive means but . . . a 
means narrowly tailored to achieve the desired 
objective. 

(internal citations omitted). 

In Rubin v. Coors Brewing Co., 115 S. Ct. 1585, 1593-94 
(1995), the Court stated that the availability of options, 
“all of which could advance the Government’s asserted 
interest in a manner less intrusive to . . . [a handler’s] 
First Amendment rights, indicates that the . . . [gov- 
ernment action] is more extensive than necessary.” 

Petitioner asserts that the Mushroom Council’s pro- 
gram is more restrictive than necessary to achieve the 
governmental purpose because: 1) a portion of the 
assessments collected by the Council is being used for 
commission overhead and expenses, thereby duplicat- 
ing the handlers’ own overhead expenses for marketing 
their mushrooms; 2) handlers are not given credit for 

97 

their own promotional and marketing efforts and ex- 
penses, thereby discouraging private advertising; 

3) producers of five hundred thousand pounds or less of 
fresh mushrooms annually, those that process mush- 
rooms, and mushroom exporters are not required to 
pay the assessments and receive a “free ride” from 
their larger competitors; and 4) the Mushroom Council’s 
efforts will spread the idea that all fresh mushrooms 
and brands are the same which undercuts Petitioner’s 
message that its mushrooms are better (Petition at 5-6). 

In Cal-Almond, the Ninth Circuit held that although 
handlers could receive credit for their own promotional 
and advertising programs, the types of promotions and 
advertising for which a handler could get credit were 
too limited, and therefore, the program was “more 
extensive than necessary to serve the interest of 
increasing almond sales.” Cal-Almond, 14 F.3d at 440. 
In Wileman, the court stated that since no credit 
whatsoever was given to the peach and nectarine 
handlers for their individual advertising and promotion 
efforts, it was consequently far more extensive than 
necessary to carry out the governmental purpose. Wile- 
man, 58 F.3d at 1379-80. 

Similarly, mushroom handlers do not receive credit 
for their own advertising and promotion efforts. There- 
fore, the Mushroom Council’s program is not narrowly 
tailored and fails the third part of the Central Hudson 
test. 

In conclusion, although the Department has a sub- 
stantial interest in promoting mushrooms, the forced 
contributions to the Mushroom Council contravene the 
First Amendment rights of mushroom handlers. The 
Mushroom Council’s program neither directly advances 

98 

the government’s interest, nor is it sufficiently nar- 
rowly tailored. The program, therefore, fails to satisfy 
the second and third parts of the Central Hudson test 
and violates the First Amendment. 

In accordance with the determinations by the Ninth 
Circuit in Wileman and Cal-Almond, since the Mush- 
room Council’s program has been found unconstitu- 
tional under the less stringent standard for commercial 
speech set forth in Central Hudson, it is unnecessary to 
reach the issue of whether the program meets the 
Supreme Court’s test for permissible government 
restriction on freedom of association. Wileman, 58 F.3d 
at 1377-78; Cal-Almond, 14 F.3d at 436. 

II. Should Cal-Almond and Wileman be Followed? 

Respondent argues that the Department of Agricul- 
ture should not follow the decisions of the Ninth Circuit 
in Wileman and Cal-Almond (Respondent’s Brief at 20- 

26), stating in its reply brief that “[t]he Secretary 
enjoys a national jurisdiction and is not constrained by 
law or policy to knee-jerk subservience to the dictates 
of any district or circuit court.” (Reply Brief at 1). 
Respondent contends that if these decisions are fol- 
lowed, they may lead to direct annihilation of all the 
advertising and promotion programs under the Agricul- 
tural Marketing Agreement Act of 1937 (Respondent’s 
Brief at 23). Instead, Respondent asserts that the 
applicable laws to be followed are the decisions of the 
Judicial Officer rather than the Ninth Circuit, even if 
the case is within the Ninth Circuit. 

Respondent states that “government speech” is im- 
plicated by the activities of the Mushroom Council, 

99 

citing Keller v. State Bar of California, 496 U.S. 1, 12- 
13 (1990), in which the Supreme Court held: 

If every citizen were to have a right to insist that no 
one paid by public funds express a view with which 
be disagreed, debates over issues of great concern 
to the public would be limited to those in the private 
sector, and the process of government as we know it 
radically transformed. 

Moreover, Respondent relies upon Lebron v. National 
R. R. Passenger Corp., 115 S. Ct. 961 (1995), in which 
the Court held that Amtrak was part of the govern- 
ment for the purposes of the First Amendment. Fi- 
nally, Respondent argues that the Supreme Court has 
never recognized any First Amendment right not to be 
compelled to do commercial promotion or advertising, 
although the Court has held that there is a right not to 
be compelled to make ideological speech in such cases 
as Abood v. Detroit Bd. of Educ., 431 U.S. 209 (1977); 
International Ass’n of Machinists v. Street, 367 U.S. 
740 (1961); West Virginia State Bd. of Educ. v. Bar- 
nette, 319 U.S. 624 (1943); and Wooley v. Maynard, 430 
U.S. 705 (1977). 

I disagree with Respondent’s contention that the 
decisions of the Ninth Circuit are not binding upon the 
Department of Agriculture in cases that arise in the 
Ninth Circuit. The only two cases in which the issue of 
whether the Department must follow a particular 
Circuit has arisen are In re Sparkman, 50 Agric. Dec. 
602 (1991) and In re Stamper, 41 Agric. Dec. 1935, 1949 
(1982). Admittedly, both cases apply to the Horse 
Protection Act and not to a marketing order. However, 
the fact is that the Department has followed the rule of 
the Eighth Circuit within the Eighth Circuit, although 

100 

it has chosen not to follow these cases outside of the 
Eighth Circuit. Similarly, I conclude that I am bound to 
follow the decisions of the Ninth Circuit within the 
Ninth Circuit. 

Respondent’s argument that government speech is 
implicated by the activities of the Mushroom Council 
was previously addressed in United States v. Frame, 
885 F.2d 1131 (3d Cir. 1989). In Frame, the Third Cir- 
cuit stated that there were “sound reasons” for con- 
cluding that the expressive activities financed by the 
Beef Promotion Act constituted ‘government speech.’ 
883 F.2d at 1131-32. However, the court held ulti- 
mately that although a “close” question was presented, 
government speech was not implicated and the Beef 
Board was not part of the government for First 
Amendment purposes. Id. I believe that decision 
applies to the facts in this case. 

It is true that the Supreme Court has never recog- 
nized any First Amendment right not to be compelled 
to do commercial promotion or advertising in the many 
cases it has decided pursuant to the First Amendment 
and in which the Central Hudson test has been applied. 
However, as I have previously determined, the Ninth 
Circuit in Wileman and in Cal-Almond has extended 
the Supreme Court decisions to this situation, and I am 
bound to follow those decisions. 

Equal Protection Analysis 

A second argument made by Petitioner is that the 
Act violates the Equal Protection clause of the Fifth 
Amendment by generally exempting producers who 
produce: 1) 500,000 pounds or less per year, 2) process 
mushrooms, or 3) export mushrooms (Petition at 6). 

101 

The Fifth Amendment contains an implicit Equal 
Protection component that prohibits the federal 
government from discriminating between individuals 
and groups. Washington v. Davis, 426 U.S. 229, 239 
(1976) (citing Bolling v. Sharpe, 347 U.S. 497 (1954)); 
United States v. Frame, 885 F.2d 1119, 1137 (3d Cir. 
1989). The general rule is that legislation is presumed 
to be valid and will be sustained if the statute’s clas- 
sification scheme is rationally related to a legitimate 
government interest unless the statute creates a 
suspect clarification that impinges upon a constitution- 
ally protected right. City of Cleburne v. Cleburne 
Living Center, 473 U.S. 432, 444 (I985); Cecelia Packing 

v. United States Dep’t of Agric., 10 F.3d 616, 624 (9th 
Cir. 1993). The Equal Protection analysis requires a 
two-part inquiry: 1) whether the challenged legislation 
has a legitimate government purpose; and 2) whether 
the challenged classification is rationally related to that 
legitimate government purpose. Rational-basis scru- 
tiny is “the most relaxed and tolerant form of judicial 
scrutiny under the Equal Protection Clause.” City of 
Dallas v. Stanglin, 490 U.S. 19, 26 (1989). “All that is 
needed . . . to uphold the . . . [classification] scheme 
is to find that these are ‘plausible,’ ‘arguable,’ or ‘con- 
ceivable’ reasons which may have been the basis for the 
distinction.” Brandwein v. California Bd. of Osteo- 
pathic Examiners, 708 F.2d 1466, 1472 (9th Cir. 1983) 
(internal citations omitted). 

102 

I. Legitimate Government Purpose 

Congress declared that the purpose of the Mushroom 
Act was to strengthen the mushroom industry’s posi- 
tion in the marketplace, maintain and expand existing 
markets and uses for mushrooms, and develop new 
markets and uses for mushrooms. 7 U.S.C. § 6101(b). I 
agree with Respondent that the “primary purpose of 
this legislation is to create a mandatory cooperative 
information and promotion program to maintain and 
expand the domestic fresh mushroom market for the 
financial benefit of producers and the industry.” 
(Respondent’s Brief at 10). The Supreme Court has 
recognized the legitimate governmental interest in 
creating other mandatory marketing order programs 
for “advancing the interests or producers” and to “raise 
producer prices.” Block v. Community Nutrition Insti- 
tute, 467 U.S. 340, 342 (1984). Moreover, as discussed 
above, the Ninth Circuit has held that there is a sub- 
stantial and legitimate government interest in creating 
effective mandatory cooperative promotion and infor- 
mation programs to stimulate market demand for the 
financial benefit of the producers and the industry. See 
Wileman, 58 F.3d at 1378; Cal-Almond, 14 F.3d at 437. 
I, therefore, find that the government’s purpose in 
strengthening the mushroom industry is legitimate. 

II. Rational Relationship 

The second step in the Equal Protection analysis is 
the determination of whether the exclusion of three 
specific groups of mushrooms or producers from the 
collection of assessments by the Mushroom Council is 
rationally related to the legitimate governmental pur- 
pose of strengthening the mushroom industry. Three 

103 

categories of mushrooms or producers are excluded 
from assessments. First, assessments under the Act 
only apply to mushrooms “. . . grown within the 
United States for the fresh market, or imported into 
the United States for the fresh market, that are 
marketed. . . .” Thus, the Act specifically excludes 

“. . . mushrooms that are commercially marinated, 
canned, frozen, cooked, blanched, dried, packaged in 
brine, or otherwise processed, as may be determined by 
the Secretary.” 7 U.S.C. § 6102(9). Second, assess- 
ments under the Act only apply to producers and im- 
porters who produce or import “. . . on average, over 
500,000 pounds of mushrooms” annually for the fresh 
market. 7 U.S.C. §§ 6102(6) and (11). Third, the assess- 
ments under the Act do not apply to exported mush- 
rooms. 7 U.S.C. § 6144(g)(4). 

A. Exclusion of Mushrooms for Processing 

Mushroom growers receive $1.03 per pound for 
mushrooms sold in the fresh market, but only $.66 per 
pound for mushrooms sold for processing (RX 69, p. l6). 
This difference in return has increased significantly 
over the last thirty years; in 1966, the difference in 
price was only $.15 per pound. Similarly, in 1993, 69% of 
mushrooms were sold in the fresh market, and only 31% 
of mushrooms were used for processing (RX 69, p. 15). 
Since the fresh market is the most lucrative mushroom 
market, it is conceivable that Congress could rationally 
conclude that only fresh mushroom producers should be 
subject to assessments because such producers would 
receive the majority of the benefit from increased 
mushroom consumption and sales. 

104 

B. Exclusion of Mushroom for Export 

In 1992-1993, total United States production of mush- 
rooms for fresh use was valued at $537,922,000 (RX 69, 
pp. 12, 24). Exports of fresh mushrooms peaked in 1990 
totaling only $22,000,000 (RX 43, p. 29). Thus, exports 
constitute approximately 4% of total United States 
mushroom production. Therefore, it is rational that 
Congress would choose to focus on the domestic mar- 
ket, thereby avoiding the administrative expense of 
worldwide marketing and distribution of promotional 
materials by the Mushroom Council. 

C. Exclusion of Producers of 500,000 Pounds or Less 

In 1993-1994, there were approximately 355 pro- 
ducers and a total production of 520 million pounds of 
mushrooms for fresh use (RX 69, pp. 9, 15). In 1995, the 
Mushroom Council collected assessments from 152 
producers, who in total accounted for 515-518 million 
pounds of fresh mushrooms (Tr. 252). Therefore, there 
are approximately 203 producers who produce a total of 
11-14 million pounds of fresh mushrooms per year. Such 
producers are excluded from the assessments collected 
by the Mushroom Council. 

Presently, the Mushroom Council receives monthly 
reports and assessment checks from 152 producers, pro- 
cesses them, and keeps records for each producer (Tr. 
257, 265). As noted by Respondent, if the identification 
and collection efforts for the 203 excluded producers 
were entirely successful, the Mushroom Council would 
receive an additional 535,000 per year based upon the 
computation of 14 million pounds times $.0025 per 
pound. Congress could have rationally concluded that 
the administrative costs associated with the collection 

105 

and identification of these small producers was not 
justified. 

Since all three challenged classifications are ration- 
ally related to the legitimate government purpose of 
strengthening the mushroom industry, the Mushroom 
Act and Order fully comply with the Equal Protection 
clause of the Fifth Amendment. 

Conclusions of Law 

1. The Mushroom Promotion Program violates the 
First Amendment of the United States Constitution. 

2. The Mushroom Promotion Program does not 
violate the Equal Protection requirements of the Fifth 
Amendment of the Constitution. 

/s/ EDWIN S. BERNSTEIN 

EDWIN S. BERNSTEIN 
April 26, 1996 Administrative Law Judge 

106 

UNITED STATES DEPARTMENT OF AGRICULTURE 
BEFORE THE SECRETARY OF AGRICULTURE 

MPRCIA Docket No. 95-1 

IN RE: DONALD B. MILLS, INC., 
A CALIFORNIA CORPORATION, 

D/B/A/ DBM MUSHROOMS, PETITIONER 

[Filed: June 12, 1996] 

DECISION ON RESPONDENT’S 
MOTION FOR RECONSIDERATION 

On April 26, 1996, I issued an Initial Decision in 
which I found that the Mushroom Promotion Program: 
(1) violates the First Amendment of the United States 
Constitution; and (2) does not violate the Equal 
Protection requirements of the Fifth Amendment of the 
Constitution. In re Donald B. Mills, Inc., 55 Agric. 
Dec. ___ (MPRCIA Docket No. 95-1, Apr. 26, 1996). 

On May 22, 1996, Respondent filed a Motion for 
Reconsideration that contended that the Initial Deci- 
sion overlooked or misapprehended relevant points of 
law and fact. Respondent argues in its motion that: 
(1) the Initial Decision overlooked recently enacted 
relevant legislation; (2) the Initial Decision contains an 
improper legal analysis; and (3) Petitioner has aban- 
doned its earlier arguments. 

On June 3, 1996, Petitioner filed a response in which 
it opposed the Motion for Reconsideration. 

107 

On June 4, 1996, the American Mushroom Institute 
(“AMI”) filed a Motion to Intervene in Support of 
Respondent’s Motion to Reconsider for the purpose of 
filing an attached brief and participating in any oral 
argument pursuant to 7 C.F.R. § 900.57. 

Section 900.57 provides, in part: 

Intervention in proceedings subject to this subpart 
shall not be allowed, except that, in the discretion of 
the Secretary or the judge, any person (other than 
the petitioner) showing a substantial interest in the 
outcome of a proceeding shall be permitted to par- 
ticipate in the oral argument and to file a brief. 

The rules applicable to petitions to modify or be 
exempted from the Mushroom Act and Order, 7 C.F.R. 
§ 1200.50 et seq., specifically adopt and incorporate the 
provisions of 7 C.F.R. § 900.57 as a procedural rule 
applicable to Mushroom Act and Order petition pro- 
ceedings. 7 C.F.R. § 1200.52(b). 

Although there will be no oral argument with respect 
to the Motion, because AMI has a substantial interest in 
the outcome of this proceeding, it will be permitted to 
intervene for the purpose of filing its brief. The Motion 
to Intervene indicates that the American Mushroom 
Institute is a national, nonprofit trade association and 
that its membership includes more than 100 com- 
mercial-size mushroom farms in the United States 
representing over 90% of domestic mushroom pro- 
duction. 

AMI asserts five arguments. First, since the Su- 
preme Court granted the Solicitor General’s Petition 
for Certiorari in Wileman on June 3, 1996, AMI argues 

108 

that I should vacate my Initial Decision and await 
further guidance pending the Court’s resolution of the 
applicable First Amendment issues. Second, AMI 
contends that I should follow “official Department of 
Agriculture policy” as articulated by the Solicitor 
General in the Petition for Certiorari in Wileman, and 
revise my Initial Decision accordingly. Third, AMI 
joins in Respondent’s argument that recently enacted 
legislation clarified Congressional intent with respect to 
the Mushroom Act and Order, the Agricultural Agree- 
ment Act of 1937, and other Federal commodity promo- 
tion laws. Fourth, AMI agrees with Respondent that 
Petitioner has abandoned its earlier arguments. Fifth, 
AMI reiterates First Amendment arguments that 
Respondent previously made and were considered in 
the Initial Decision. Since the latter arguments were 
discussed in the Initial Decision, they will not be dis- 
cussed again in this Decision. 

Upon reconsideration, I adhere to my Initial Decision 
for the reasons set forth in the Initial Decision and for 
the following reasons: 

I. The Recently Enacted Legislation. 

Both Respondent and AMI argue that the Initial 
Decision overlooked recently enacted relevant legis- 
lation. (Respondent’s Motion at 2; Intervenor’s Brief at 

7). On April 4, 1996, the Federal Agriculture Improve- 
ment and Reform Act of 1996 (“the 1996 Act”) was 
signed into law. Federal Agriculture Improvement and 
Reform Act of 1996, Pub. L. No. 104-127, 110 Stat. 888 

109 

(1996). Section 501 of the Act provides, in relevant 
part: 

(b) FINDINGS.—Congress finds the following: 

. . . . 

(3) The central congressional purpose underlying 
each commodity promotion law has always been to 
maintain and expand markets for the agricultural 
commodity covered by the law, rather than to 
maintain or expand the share of those markets held 
by any individual producer or processor. 

. . . . 

(9) While some commodity promotion laws grant a 
producer or processor the option of crediting 
individual advertising conducted by the producer or 
processor for all or a portion of the producer’s or 
processor’s marketing promotion assessments, all 
promotion programs established under the commod- 
ity promotion laws, both those programs that permit 
credit for individual advertising and those programs 
that do not contain such provisions, are very nar- 
rowly tailored to fulfill the congressional purposes of 
the commodity promotion laws without impairing or 
infringing the legal or constitutional rights of any 
individual producer or processor. 

. . . . 

(c) INDEPENDENT EVALUATION OF PRO- 
MOTION PROGRAM EFFECTIVENESS.—Except 

as otherwise provided by law, each commodity 
board established under the supervision and 

110 

oversight of the Secretary of Agriculture pursuant 
to a commodity promotion law shall, not less often 
than every 5 years, authorize and fund, from funds 
otherwise available to the board, an independent 
evaluation of the effectiveness of the generic 
commodity promotion programs and other programs 
conducted by the board pursuant to a commodity 
promotion law. The board shall submit to the 
Secretary, and make available to the public, the 
results of each periodic independent evaluation 
conducted under this subsection. 

§ 501, 110 Stat. at 1029-31. 

Respondent argues that “Congress has stated that its 
goals are not, and have never been, the same as 
individual handler promotion goals and cannot validly 
be judged on any such comparative basis.” (Respon- 
dent’s Motion at 4-5). The 1996 Act recognizes that the 
goal of any commodity promotion program is to expand 
and enhance the market for the particular commodity 
that is being promoted, rather than the share of the 
market for any individual producer. Similarly, the 
Ninth Circuit in Cal-Almond and Wileman recognized 
that there was a substantial government interest in 
stimulating and expanding the overall market demand 
for almonds and peaches and nectarines, respectively. 
Cal-Almond v. United States Dep’t of Agric., 14 F.3d 
429, 437 (9th Cir. 1993); Wileman Bros. & Elliott v. 
Espy, 58 F.3d 1367, 1378 (9th Cir. 1995). In the Initial 
Decision, I stated that “the government’s interest in 
promoting and expanding the mushroom industry is 
substantial.” (Initial Decision at 10). This analysis is 
not premised on the goal of expanding the share of an 
individual mushroom producer or handler, but on 

111 

increasing the overall demand for mushrooms in 
general. 

Respondent further contends that Congress “clari- 
fied that the lack of credits for individual promotion of 
mushrooms does not detract from Congress’ conclusion 
that the mushroom act is very narrowly tailored to 
fulfill Congress’ purposes . . . .” (Respondent’s 

Motion at 4). Although Respondent contends that the 
recent legislation was enacted “[u]ndoubtedly in re- 
sponse to the Wileman decision,” (Respondent’s Motion 
at 3), there is no indication in the legislative history of 
the 1996 Act that Wileman, Cal-Almond, or the Mush- 
room Council’s program were considered by either the 
House or the Senate in enacting that legislation. 

In the Initial Decision, I stated that “mushroom 
handlers do not receive credit for their own advertising 
and promotion efforts. Therefore, the Mushroom Coun- 
cil’s program is not narrowly tailored. . . .” (Initial 

Decision at 15). A general statement by Congress 
which does not focus on the specifics of the mushroom 
industry and the Mushroom Council’s promotion pro- 
gram does not change my analysis. Furthermore, def- 
erence to legislative findings cannot limit judicial 
inquiry when constitutional rights are involved. See, 

e.g., Sable Communications of California, Inc. v. 
F.C.C., 492 U.S. 115, 129 (1989). 

Finally, Respondent contends that Congress de- 
scribed in the 1996 Act the proper time for measuring 
the effectiveness of a commodity promotion program. 
(Respondent’s Motion at 6). Although Congress estab- 
lished five years as the appropriate time period for each 
commodity board to conduct an independent evaluation 
of program effectiveness, it did not say that the courts 

112 

could not evaluate a program before that time to deter- 
mine constitutionality. 

II. The Correct Analysis Was Applied. 

Respondent’s second argument is that, assuming 
arguendo that Wileman should be followed, the Initial 
Decision overlooked or misapprehended that the proper 
comparison to make in determining whether the direct 
advancement prong of Central Hudson has been 
satisfied “is between the Council’s promotion program 
and a producer’s promotion program.” (Respondent’s 
Motion at 6). In Wileman and Cal-Almond, the assess- 
ments were made upon handlers, not producers. As 
found in my Initial Decision, however, “[a]ssessments 
under the Mushroom Promotion, Research, and Con- 
sumer Information Act, and the Mushroom Promotion, 
Research, and Consumer Information Order are levied 
on fresh mushroom producers and importers . . .” 
(Finding of Fact 18). 

On page 13 of the Initial Decision, I stated: 

The Department has demonstrated that advertising 
increases consumption of mushrooms. However, the 
Department has not shown that the efforts of the 
Mushroom Council are better at increasing con- 
sumption than the individual efforts of the mush- 
room handlers. None of the government witnesses 
could substantiate that any part of their program 
increased sales of, demand for, or the price of 
mushrooms, nor could they show that new markets 
had been expanded, new uses had been found, or 
that the program strengthened the mushroom 
industry’s position in the marketplace (Petitioner’s 
Brief at 17). Thus, the Mushroom Council’s program 

113 

has not “directly advanced” the government’s 
interest and fails the second part of the Central 
Hudson test. 

(emphasis added). 

Clearly, the second sentence of this paragraph refers 
to handlers, not producers of mushrooms. However, 
the statement applies equally to producer-handlers of 
mushrooms, of which Respondent contends there are 
currently 59. (Respondent’s Motion at 7). 

Respondent contends that producers of mushrooms 
do not engage in promotion. However, the evidence 
indicates that Petitioner, a producer-handler, is en- 
gaged in personal selling techniques by meeting with 
produce managers and buyers to maintain existing 
markets and to develop new markets. Such personal 
selling is done in face-to-face meetings and telephone 
calls to produce brokers, buyers, and managers. Peti- 
tioner argues that the amounts of money that it must 
pay to the Mushroom Council reduce the money that it 
can devote to personal selling. (Petitioner’s Response 
to Pre-Hearing Order I at 8). Petitioner also argues 
that if it did not have to pay the assessment, it would 
install new air conditioning, allowing for increased pro- 
duction and an even better quality product. (Peti- 
tioner’s Brief at 12-13; Tr. 746-47). 

To the same effect, Petitioner presented evidence 
that Pictsweet Mushroom Farms, a large producer- 
handler of mushrooms, engages in substantial promo- 
tion. Pictsweet does many things to increase the sale of 
and demand for mushrooms: (1) providing personal 
service; (2) using its sales force to contact customers 
directly; (3) developing merchandising plans for 

114 

customers; (4) providing paper bags in grocery stores 
because mushrooms last longer if they are stored in 
paper bags; (5) engaging in promotion and advertising 
programs with retailers; and (6) providing recipes for 
retailers to distribute to consumers. (Tr. 615-17). 
Pictsweet also provides promotional material to retail- 
ers, price discounts when retail stores put mushrooms 
on sale, and money for joint advertising. (Tr. 617-19). 
John Haltom, Pictsweet’s president, testified that 
Pictsweet’s individual advertising and promotion 
efforts have been successful in increasing the sale of 
mushrooms. (Tr. 640). 

In the Initial Decision, I stated that “although the 
public relations and educational programs run by the 
Council were performed very well, the Council has seen 
no measurable benefit in increased sales of mushrooms 
as a result of these programs (Tr. 648-49).” (Initial 
Decision at 13). Because the evidence has not shown 
that the Mushroom Council was better able to promote 
and increase consumption of mushrooms than such 
producer-handlers, or to increase consumption at all, 
the Mushroom Promotion Council’s program has not 
been shown to directly advance the government’s 
interest in stimulating and expanding the mushroom 
industry. 

III. Petitioner Has Not Abandoned Its Earlier 
Arguments. 

Respondent and AMI argue that Petitioner has 
abandoned its earlier arguments by stating in an amici 
curiae brief submitted to the United States Supreme 
Court in Wileman that “[t]he Ninth Circuit decision is 
not binding on any other governmental mandatory 
promotion and advertising program, whether it be a 

115 

federal program or a state program—as the federal or 
state government, respectively, can make a showing 
that other agricultural programs meet the Central 
Hudson test. . . .” (Respondent’s Motion at 8-9; 

Intervenor’s Brief at 11-12). Petitioner has not con- 
ceded that Wileman is inapplicable to all promotion 
programs; Petitioner has merely stated that each pro- 
motion program must be evaluated on its individual 
facts. 

IV. The Initial Decision Need Not Await Further 
Guidance From The Supreme Court. 

AMI contends that I should vacate my Initial Deci- 
sion and await further guidance from the Supreme 
Court, which on June 3, 1996, granted the Solicitor Gen- 
eral’s Petition for Certiorari in Wileman. Glickman v. 
Wileman Bros. & Elliott, Inc., 58 F.3d 1367 (9th Cir. 
1995), cert. granted, 64 U.S.L.W. 4675 (U.S. June 3, 
1996) (No. 95-1184). (Intervenor’s Brief at 2). On May 
20, 1996, the Solicitor General also filed a Petition for 
Certiorari seeking review of the Cal-Almond decision, 
but asking the Court to withhold action pending the 
resolution of the First Amendment issues in Wileman. 
United States Dep’t of Agric. v. Cal-Almond, Inc., 67 
F.3d 874 (9th Cir. 1993), petition for cert. filed, 64 
U.S.L.W. 4584 (U.S. May 28, 1996) (No. 95-1879). In 
support of this argument, AMI states that the Judicial 
Officer issued an Order to Show Cause why he should 
not “forestall” his Decision and Order and await “the 
outcome of proceedings for judicial review of Wileman 
and Cal-Almond,” in a second Cal-Almond case 
currently on appeal within the Department. (“Cal- 
Almond II”). 

116 

I believe that it would be counterproductive to 
judicial efficiency to vacate and/or stay the Initial 
Decision. Unlike the Judicial Officer in Cal-Almond II, 
I have already considered the arguments presented by 
Respondent and Petitioner and issued a written deci- 
sion in this matter from which an appeal to the Judicial 
Officer already has been filed. Upon appeal, if the 
Judicial Officer wishes to stay this matter pending reso- 
lution of the First Amendment issues by the Supreme 
Court in Wileman, then both Cal-Almond II and the 
instant case can be stayed at the same level. 

V. The Solicitor General’s Position Is Not 
Controlling. 

AMI argues that the legal position of the Secretary of 
Agriculture with respect to the issues involved in the 
instant case is clearly set forth in the Solicitor General’s 
Petition for a Writ of Certiorari in Wileman and that I 
am bound to follow this position. (Intervenor’s Brief at 

7). Although the Solicitor General filed a Petition for 
Certiorari in Wileman on behalf of the Department, it 
is unclear that the Solicitor’s brief represents official 
Department policy rather than the position of the Office 
of the General Counsel. 

As an administrative law judge, it is my duty to de- 
cide cases in accordance with applicable legal authority. 
In the instant case, until such decisions are reversed or 
modified, the Ninth Circuit decisions of Wileman and 
Cal-Almond must be followed. Based upon the analysis 
required by these cases—the application of the Central 
Hudson test to the Mushroom Council’s program—I 
have found that the Mushroom Council’s program viola- 
tes the First Amendment. 

117 

The Office of the General Counsel, representing 
USDA, is a litigating party in all cases that are heard 
and decided by United States Department of Agricul- 
ture administrative law judges. Nevertheless, the 
function of administrative law judges in this Depart- 
ment, as well as in all other departments and agencies 
throughout the federal government in which the 
departments and agencies are parties, is to impartially 
adjudicate the issues rather than automatically adhere 
to the views of the departments and agencies who are 
litigating parties. Anything less would undermine the 
very essence of the Administrative Procedures Act and 
its concept of independent federal administrative law 
judges. 

Accordingly, upon reconsideration, I affirm my Initial 
Decision. 

/s/ EDWIN S. BERNSTEIN 

EDWIN S. BERNSTEIN 

June 12, 1996 Administrative Law Judge 

118 

UNITED STATES OF AMERICA 

DEPARTMENT OF AGRICULTURE 

HEARING 

MPRCIA No. 95-1 

IN RE: DONALD B. MILLS, INC. 
A CALIFORNIA CORPORATION, 
D/B/A/ DBM MUSHROOMS 

VOLUME I 

U. S. Tax Courtroom 2-1350 
Federal Building 
450 Golden Gate Avenue 
San Francisco, California 

Tuesday 
August 15, 1995 

The hearing was convened, pursuant to Notice, at 
9:00 a.m. 

BEFORE: EDWIN S. BERNSTEIN, 

Administrative Law Judge 

119 

[Testimony of Wade Whitfield] 

* * * * * 

[1-276] 

Q Is there a surplus of fresh mushrooms? 

A Is there a surplus of fresh mushrooms? 

Q Yes. 

A No, I couldn’t say there was a surplus of fresh 
mushrooms. There might—the term might be “an 
adequate supply.” 

Q The term might be an inadequate supply? 

A An adequate supply. 

Q So there is not a problem with mushrooms with 
respect to overproduction of mushrooms. Correct? 

A I don’t think there is at this time, an over- 
production. There’s a possibility of being; . . . 

* * * * * 

[1-294] 

Q Does the Council have any statistics showing 
that there was any increase sales of mushrooms as a 
result of that Let Your Love Mushroom campaign? 

A I don’t have my production volume sheet here 
with me. The only knowledge I have is one of our 
cou[n]cil members did say that, in his analysis, it did 

120 

increase consumption. It did increase, and that’s the 
only thing I heard. 

Q Now— 

A We have no documentation. 

* * * * * 

121 

UNITED STATES OF AMERICA 

DEPARTMENT OF AGRICULTURE 

HEARING 

MPRCIA No. 95-1 

IN RE: DONALD B. MILLS, INC. 
A CALIFORNIA CORPORATION, 
D/B/A/ DBM MUSHROOM 

VOLUME II 

U. S. Tax Courtroom 2-1350 
Federal Building 
450 Golden Gate Avenue 
San Francisco, California 

Wednesday 
August 16, 1995 

The hearing was convened, pursuant to adjournment, 
at 9:00 a.m. 

BEFORE: EDWIN S. BERNSTEIN, 

Administrative Law Judge 

122 

[Testimony of Wade Whitfield] 

* * * * * 

[2-320] 

Q And do you know what that quantity is then? 

A Of what? 

Q Of processed mushrooms for 1995? 

A I could give you a round number without having 
a document in front of me. 

Q A round number is fine. 

A Okay. Fresh market is a round number of 500 
million pounds. 

Q Okay. 

A Processed market is about 250 million pounds. 

Q Okay. And was the same ratio or the approxi- 
mately same ratio true in 1994? 

A I’m sure it was. 

Q Okay. 

A Very close probably. 

Q Has the Council conducted any studies to [2-321] 
determine the price differentiation between the pro- 
cessed price and the fresh price? 

A No. 

Q Has the Council conducted any studies to 
determine whether or not an increase in the price of 

123 

fresh mushrooms will increase or decrease the price of 
the processed mushrooms? 

A No, we haven’t. 

Q Now the 500 million pounds that you estimate— 
the 518 million pounds that you estimate for 1995, that 
does not include the production from producers who 
produce less than 500,000, correct, 500,000 pounds? 

A It does not include that. 

Q Now when was it that you began your “Blue- 
print for Profit” that you discussed yesterday? Respon- 
dent’s Exhibit 72. 

A Well, we started production of it early in the 
year of ‘95, but we sent it out and announced it about 
the middle of May. 

Q Of 1994? 

A 1995. 

Q 1995. Okay. 

A This year’s program. 

Q So it was sent out to the retailers in [2-322] 
approximately 1995? I mean in May of 1995? 

A Yes. 

Q Okay. And what was the cost of that project? 

A The initial cost was $60,000 to produce all of the 
materials and get it to the producers and to the 
retailers. 

124 

Q Now was that $60,000 cost—did that include any 
firms that you hired to come up with that program? 

A Yes. 

Q Okay. And how much was paid to that firm if 
you can recall? 

A Well, we used them for two or three projects all 
together. 

Q Okay. 

A I would estimate somewhere between a $7,000 
and $10,000 consulting fee. It falls back into the 10 to 15 
percent category that I talked about yesterday. 

Q And did those originally just go out to the 
retailers or retailers and handlers? 

A They were sent to the producers first— 

Q Okay. 

A —which includes handlers. 

[2-323] 

Q Okay. So they were sent to the producers and 
then there were more packages made and sent out to 
producers or retailers? 

A To retailers. 

Q Okay. And approximately how many were sent 
out? 

A We have a 250 list for producers/handlers in the 
industry of people who are interested in getting our 

125 

materials. We have a 520 number list of retailers 
around the U.S., so I think that would be somewhere in 
excess of 750 kits. 

Q Then there was—I think you testified that 
almost 70 more stores ordered more? 

A Store groups. 

Q Store groups. Representing about 15,000 stores? 

A That’s close. Yes. 

Q And you said that there’s approximately 30,000 
stores in the United States? 

A 30,000 supermarkets. I think there’s 30,000- 
35,000 —somewhere in that area throughout the United 
States. 

Q Okay. But that does not include—well, what’s 
the opposite of store chains? You know, the mom and 
pop— 

[2-324] 

A The independents? 

Q The independents. Does your 30,000 
figure—does that include the independents? 

A No, that does not include the independents. 

Q Do you know approximately how many stores 
there are in the United States that carry produce? 

A I’m not certain, but it would have to be at least 
15,000 or more. 

126 

Q Okay. Now based upon this mailing in May of 
1995, did you see any increased sales as a result of that 
promotional effort in May of 1995? 

A We sent it out—it was late May by the time it 
reached the retailers. If anything had happened it 
would have happened in June. We do not receive our 
assessments until—for June until the end of July, so our 
last report would have probably been the one that 
might have reflected some increase or whatever. But I 
—to be honest with you I have not studied it. 

Q Okay. So as you sit here today you don’t know if 
that program increased consumption? 

A No. Anything I’d say would be an assumption. 

Q Does the Council keep track of the [2-325] 
prices? 

A No. 

Q The prices that fresh mushrooms are sold. Does 
the Council keep track of what price retailers are 
charging for the mushrooms? 

A Only in the relatively small study that we’re 
doing with six major retailers around the U.S. That’s 
the only data gathering that we’re doing at this time. 

Q Now has the Council conducted any research or 
gotten a hold of any research showing the nutritional 
value of mushrooms? 

A Yes. There was a study done several years ago 
about the nutritional values of mushrooms that was 

127 

approved by the FDA for use. In fact, you could use it 
on labeling. 

Q Okay. And it’s claimed, is it not, that there is no 
fat in mushrooms? 

A Yes, that’s correct. 

Q And there is no cholesterol in mushrooms? 

A That’s correct. 

Q There’s no sodium in mushrooms? 

A Correct. And you’re allowed to declare that. 

* * * * * 

[2-327] 

Q Okay. Is there any claims made by the 
Mushroom Council in its consumer educational program 
talking about whether mushrooms are healthy? 

A Yes. Yes, I’m certain there are. 

Q Are there any claims in your promotional 
material to consumers that mushrooms are nutritious? 

A If there are it would be very, very minor as far 
as nutritious. 

Q Why would it be very, very minor? 

A Because it’s a fact. 

Q Because what? 

128 

A It’s a fact. I’ve always said that what 
mushrooms —the best of what they have is what they 
don’t have. They have very few calories. They have no 
sodium, no fat, and no cholesterol. 

Q Besides the fact that they don’t have the bad 
things, what you’re saying is they really don’t have the 
good things either? 

A They have some, but it’s—it’s on a [2-328] minor 
level. 

Q You’re aware of the fact that there’s a lot of 
produce in the market that a consumer can buy that is 
much more nutritious for the consumer? 

A I’m not certain of that. I—I’ve only had experi- 
ence with lettuce as far as fresh produce is concerned. 

Q I believe you also testified that there was a 
research project that you entered into with—was it 
Rutgers? 

A Yes. 

Q Okay. And that was to see if you could get 
Bravo approved as a—or to keep Bravo approved as a 
pesticide or herbicide? 

A It was done to do more research and establish 
more data so that—the hope would be that they could 
get a final registration on Bravo for use on mushrooms. 

Q And it’s a fact that Bravo is not allowed for use 
in California, isn’t that correct? 

A I’m not sure of that. 

129 

Q What is the greatest fresh mushroom producing 
region in the United States? 

A Pennsylvania. 

Q Okay. And approximately what percentage [2- 
329] of the fresh mushroom production is in Pennsylva- 
nia? 

A According to the statistics we see from the gov- 
ernment it’s about 43 percent. 

Q And California is second? 

A Yes. 

Q And approximately what percent is California? 

A I think in the last number I saw it was 17 
percent. 

Q So you have approximately 60 percent of the 
mushrooms grown in two states? 

A That’s correct. Fresh mushrooms. 

Q Now if I have these numbers correct, you have 
identified 152 mushroom producers that are subject to 
the assessments? 

A That we have identified, yes. 

Q Okay. You have so far on file 59 exemptions. 59 
known producers for exemptions, because they produce 
less than a half a million pounds, correct? 

A According to the applications they sent to us. 
Yes, that is correct. 

130 

Q Now has the Council done any work just to make 
sure that those people that have filed exemptions are 
producing less than a half a million pounds? 

[2-330] 

A At this point, no. 

Q You believe though that there are some mush- 
room producers that you still haven’t found? 

A I’d say the possibility exists. 

Q Okay. From what I learned yesterday from you 
there are 43 out of the 152 are producer and handlers, 
correct? 

A That’s correct. 

Q And 16 that are handlers only? 

A That’s correct. 

Q And if I understand that to mean it is that they 
market fresh mushrooms, but they grow none of their 
own? 

A That’s correct. 

Q Now do you have any figures as to these 43 that 
are producers and handlers—how many of those 43 also 
purchase from other producers? 

A No, I don’t have that information. 

Q Now is a company required to file exemptions 
with the Council if they are exporting fresh mush- 
rooms? 

131 

A No. 

* * * * * 

[2-514] 

Q Now in your opinion in being involved with 
agricultural products for the last 20 or so years, is there 
very much nutritional value to mushrooms? 

A No, however I think by virtue of the fact that 
they don’t contain—the things that they don’t contain 
—mushrooms have value. And by that I mean mush- 
rooms are low in sodium, low in fat, low in cholesterol, 
and they have some fiber, but they have a good story 
because they aren’t harmful, and they’re perceived to 
be good for you. 

Q But mushrooms don’t show up on any USDA 
pyramid charts as being promoted to be consumed by 
the American public on a weekly basis? 

A No. 

Q Then you are aware that there are many other 
vegetables that people can buy in the produce section 
that are much higher in nutritional value and still don’t 
have the bad things—the fat and cholesterol? 

A Yes. 

[2-515] 

Q And are a number of those vegetables that you 
can buy in the produce section that are much higher in 
nutritional value than mushrooms, are there some of 
those that don’t have a mandatory promotional pro- 
gram? 

132 

A Yes. 

* * * * * 

[Testimony of Robyn Wilk] 

[2-518] 

Q Does the Mushroom Council to your knowledge 
have any information that any of the programs that 
have been completed in 1995 has increased the con- 
sumption of mushrooms? 

A No. 

Q Nothing that shows any increased sales in 
mushrooms? 

A No. We’re not in the business of sales. 

Q I think on the public relations portion you said 
that there was approximately 850 newspapers that you 
sent this information to? 

A Right. Correct. 

Q And I do believe you stated that there’s no 
assurances and there’s no guarantees. Do you know 
how many ran your promotional material of the 850 you 
sent them to? 

A Well, we have a press clipping service that sends 
back clips to us, which would suggest what kind of 
pickup we’re getting. We subscribe to that [2-519] 
service through the use of our public relations agency. 

133 

At best a clipping service will tell you that they only 
can generate and hope to provide you about a 30 
percent response in terms of what’s really happening 
out there. 

Q So this service that you subscribe to—did they 
give you any information as to how many of the 850 
newspapers ran this promotional piece? 

A No, not yet, and I expect that we’ll have more of 
that information available at the end of the year when 
we have a year-end summary of our activities from the 
agency. We’re not there yet. 

Q Now one of the things that you mentioned, and 
I’m having difficulty understanding what it was—you 
said that all of the studies had been completed and they 
were reported at the July meeting. Which studies were 
those? 

A Oh, excuse me. 

Q I know you said it. I just didn’t pick it up. 

A Jim Degan, who again was the consultant the 
Mushroom Council retained to conduct the foodservice 
studies, reported on the findings of the two major 
studies that have been done subsequent to [2-520] the 
internal assessment, which was completed last Spring. 
Between Spring and the Board meeting at the end of 
July there were two additional studies completed, the 
pizza study and the distributor study—foodservice 
distributor study. Both of those studies were reported 
on at the July Board meeting in Chicago. 

134 

Q And one of those studies indicated that in 1990 
there was a substantial downturn in the foodservice 
business? And then it picked back up again? 

A Well, the foodservice industry has suffered like 
many other industries as a result of the economy. 
When people don’t have as many available dollars to 
spend the foodservice industry suffers because that 
affects their pockets when people don’t eat out as much. 

Q And the Mushroom Council has determined that 
the foodservice industry is very important to fresh 
mushrooms? 

A The producers and people within the Mushroom 
Council themselves, yes, have determined that they see 
that as a very—potentially a very—an active market 
currently, and one that they very much wish to pursue. 

[2-521] 

Q With pizza amounting to about 30 percent of the 
mushroom business for foodservice? 

A No. I didn’t say pizza. I said that the studies 
indicate that approximately 30 percent of their fresh 
production—they feel—goes into that whole area called 
foodservice, which would also encompass pizzas as one 
segment of it. 

Q But do you recall that the foodservice industry 
had their downturn beginning in 1990 based upon one of 
the reports here? 

A I don’t have any recollection of that. 

135 

Q Now with respect to Exhibit 79, the Cyberspace 
where people send in recipes, and the winner will—or 
there maybe—is there just one winner? 

A Three winners. 

Q Three winners. And each would receive a $10,000 
savings bond? 

A No. That’s the total. 

Q Okay. 

A Upon maturity. 

Q Okay. And do you know how many recipes have 
been submitted as a result of that? 

A I understand so far a couple of hundred. We still 
have till the end of September for the cutoff [2-522] 
date. 

Q And I take it the Mushroom Council is putting 
up the entire $10,000 savings bond? 

A That’s correct. 

Q The—Exhibit 81 is the magazine, the “Meals in 
Minutes”? 

A Right. 

Q And when did that come out? 

A That came out in June of 1995. 

Q Do you know in response to this June publication 
whether or not sales—fresh sales—of mushrooms in 
July were—did they have an increase? 

136 

A I have not heard any figures to reflect that. 

* * * * * 

137 

UNITED STATES OF AMERICA 

DEPARTMENT OF AGRICULTURE 

HEARING 

MPRCIA No. 95-1 

IN RE: DONALD B. MILLS, INC. 
A CALIFORNIA CORPORATION 

D/B/A/ DBM MUSHROOM PETITIONER 

VOLUME III 

U. S. Tax Courtroom 2-1350 
Federal Building 
450 Golden Gate Avenue 
San Francisco, California 

Thursday 
August 17, 1995 

The hearing was convened, pursuant to adjournment, 
at 9:00 a.m. 

BEFORE: EDWIN S. BERNSTEIN, 

Administrative Law Judge 

138 

* * * * * 

[3-592] 

JOHN HALTOM 

was called as a witness by the Petitioner and, having 
been first duly sworn, was examined and testified as 
follows: 

JUDGE BERNSTEIN: Please state your full 
name and address. 

THE WITNESS: John Haltom, H-a-l-t-o-m, [3- 
593] 3701 Brownsville Highway, Jackson, Tennessee 
38301. 

JUDGE BERNSTEIN: Thank you. 

MR. LEIGHTON: Good morning, Mr. Haltom. 

THE WITNESS: Good morning. 

DIRECT EXAMINATION 

BY MR. LEIGHTON: 

Q What is your current position? 

A My current position is I am President of Picts- 
weet Mushroom Farms, which is an operating division 
of the United Foods, Inc. 

Q Does the court reporter have this down? Could 
you spell Pictsweet? 

A She has my business card. 

Q Okay. And then for the court, then? 

139 

A P-i-c-t-s-w-e-e-t. 

JUDGE BERNSTEIN: Thank you. 

BY MR. LEIGHTON: 

Q And how long have you occupied that position 
with Pictsweet? 

A Since October of 1991. 

Q And has your position changed any time during 
that period of time? 

A No, it has not. 

Q And, prior to being the president of Pictsweet, 
what was your position? 

[3-594] 

A I was Director of Inventory Planning and Dis- 
tribution for Pictsweet Frozen Foods. 

Q And how is Pictsweet Frozen Foods connected 
with United Foods? 

A Pictsweet Frozen Foods is an operating division 
of United Foods, just as Pictsweet Mushroom Farms is. 

Q And how long has Pictsweet Frozen Foods been 
in business? 

A Pictsweet Frozen Foods started 50 years ago, 
1945, as a strawberry processor with a single-plant 
operation in Bells, Tennessee. 

Q And how has Pictsweet grown since then? 

140 

A Well, it started out just freezing one single 
product, strawberries, and selling them to wholesalers 
for distribution to drug stores like Walgreen’s, when 
Walgreen’s had a soda fountain. It’s progressed from 
that point to its current size today. 

Q And approximately how many different foods 
does Pictsweet distribute? 

A Pictsweet Frozen Foods is only in the frozen 
vegetable business and it has thousands of stock- 
keeping units. And it is a vegetable product that is to 
be frozen, its product line, from asparagus to zucchini. 

[3-595] 

Q And there are how many SKUs? 

A Thousands, 3000. 

JUDGE BERNSTEIN: What’s an SKU? 

THE WITNESS: Stock-keeping unit. 

JUDGE BERNSTEIN: Thank you. 

BY MR. LEIGHTON: 

Q And that’s how you keep track of what you have 
in inventory and what you sell? 

A On the frozen food side. 

Q Now does Pictsweet have something other than 
frozen foods? 

A Pictsweet Mushroom Farms. 

141 

Q Okay. How long has Pictsweet Mushroom 
Farms been in existence? 

A Since October of 1987. 

Q And how long were you with—when did you 
start with United Foods? 

A 1976. So next year will be 20 years. 

Q Now you stated that your position was with 
United Foods; what were your job responsibilities? 

A With Pictsweet Frozen Foods? 

Q Yes. 

A Started out as a transportation analyst in the 
Distribution Department and wound up [3-596] 
responsible for total distribution of all frozen foods, 
buying all components that the company did not 
produce in their own plants, procurement of all packing 
materials and other sundry items, planning inventory, 
scheduling production, customer service. 

Q Now could you state what your job responsibili- 
ties are with respect to your fresh mushroom division? 

A Our mushroom is structured as three separate 
business units. We have a mushroom farm in Ventura, 
California; we have a mushroom farm in Salem, Oregon; 
and we have a mushroom farm in Fillmore, Utah. 

Each mushroom farm is a separate business 
entity and each farm has a general manager. And the 
general manager has a staff that allows him to perform 
all the duties that any independent business would have 
to perform. Each farm is a profit center. 

142 

And my responsibilities are to give those three 
farms direction, to motivate them, to hire good people, 
to measure their results, and stay out of their way. 

Q Now other than with respect to each of those 
separate farm entities, what else is your job position 
with Pictsweet? 

A We’re an operating division. I have [3-597] profit 
and loss responsibility for Pictsweet Mushroom Farms. 
I report to the Board, I report to the President, and I 
make quarterly reports to our Board of Directors. 

Q Now what is your educational background? 

A I have a bachelors degree from the University of 
Tennessee, Knoxville, and I’ve done graduate work at 
Georgia State University. 

Q And in what area of education? 

A Transportation and marketing. 

Q What is the most profitable food product sold by 
Pictsweet? 

A On a per-pound basis? 

Q Yes. 

A Mushrooms. 

Q Mushrooms? 

A Mushrooms, without a doubt; the category mush- 
rooms would be our most profitable item. 

143 

MR. LEIGHTON: When I ask you questions, if 
you find that it is too proprietary to answer, please let 
me know so we— 

THE WITNESS: Sure. 

MR. LEIGHTON: I do not want to ask you any 
proprietary information that you don’t want to provide. 

[3-598] 

THE WITNESS: Sure. 

BY MR. LEIGHTON: 

Q But approximately what percent of Pictsweet’s 
business is mushrooms? 

A Twenty-five percent. 

Q And what percentage of Pictsweet’s mushrooms 
are sold fresh? 

A Fresh market is difficult to measure because, 
when you market mushrooms, you have to market the 
total crop. Our largest customer is a manufacturer of a 
meat substitute where mushrooms would be the 
primary ingredient in that meat substitute. We sell 
that one account, that one customer, one ship-to loca- 
tion, over 100,000 pounds a week. That’s processed. 

We, in total, sell about 50 percent of our total 
volume to retailers and the other 50 percent goes to 
processors such as the meat substitute manufacturer. 
We also have the ability on certain days of the week, 
because it must be marketed and sold daily— 
mushrooms must be marketed and sold daily—of 

144 

having to, at times, go to the processor of what I call 
last resort. 

Mr. Reitnauer is a processor; his company’s a 
processor. They post a price. If you . . . . 

* * * * * 

[3-600] 

mismanaged. The owners had some personal legal 
problems, financial difficulty. They didn’t own this 
business very long and, when we bought it, it was in 
bankruptcy and the facilities had been run down and 
mismanaged. In fact, the customer base was basically 
gone. 

When a product company or mushroom farm 
physically goes out of business, those customers have to 
go somewhere else to buy their mushrooms. When you 
go back in business, you have to rebuild that credibility, 
you have to rebuild that reliability and that trust. And 
it’s almost—sometimes I think it takes generations to 
completely erase such bad experiences as happened to 
our customer base. 

We’ve been fortunate enough that we’ve been 
able to overcome it completely and have been doing 
quite well in the mushroom business from the first 
month. We were profitable the first month and we’ve 
been profitable since then every quarter. 

Q So they bought these mushroom farms in 1987, 
you began being in charge of that mushroom business in 
1991? 

A Uh-huh—yes. 

145 

Q Have your sales increased every year since 
then? 

[3-601] 

A Yes, they have. Since 1991—I might add, since 
1991, our business is up 25 percent in pounds. So our 
prices are higher, our revenues are higher, and our pro- 
fit since 1991 has more than doubled. 

Q You heard Mr. Moss testify the day before 
yesterday there was a decline in consumption from 1990 
to 1993. Did Pictsweet feel that? 

A In the markets that we serve—you must under- 
stand that we don’t sell to a national market, we sell to 
regional markets. You can’t ship mushrooms long 
distances, they have a very short shelf-life. The more 
they’re handled, the more they bruise, and the quality 
is reduced substantially after the pick. 

Our markets have shown continued growth, 
individually and collectively. Now there are blips in 
that; the Los Angeles market has been a tough market, 
you’ve had natural disasters, you had riots, you had a 
recession, you had defense industry cutbacks. I mean, 
that’s been a tough market. 

Q You had an earthquake down there, too. 

A Earthquake, I think it’s a natural disaster. 

Q Could you describe, and perhaps in the following 
order, how mushrooms are grown, marketed, 

* * * * * 

[3-606] 

146 

A Well, they don’t insist on it because they can get 
it from everyone else. But, because we can provide it, 
what the retailer can do is order this morning and then 
revise his order before noon in order for us to get it on 
the truck to deliver in the evening. So we allow—we 
provide the service to the retailer that they can fine- 
tune their inventory every day to match their sales 
requirements at their stores. 

Q Now, if a mushroom is picked today in Ventura, 
delivered to an L.A. supermarket today, is it on the 
shelf by tomorrow usually? 

A Usually on the shelf by tomorrow; that’s right. 

Q Your retailers that you deal with, how long will 
they allow product to sit on the shelf that hasn’t sold? 

A It’s not how long they will allow it, it’s what will 
the product look like. And they will take some action 
after a certain period of time—they’ve got several 
options. One is, they reduce the price on their own to 
move it. Or they will throw it in the trash. 

Now the fact that we’re there every day reduces 
their shrink; and their shrink is what they throw in the 
trash. 

[3-607] 

Now they told me that mushrooms have about seven 
percent shrink. Now the retailer eats the shrink. 
Anything we can do to reduce that shrink increases 
their margins, provides a better quality product, and 
cements the relationship that we have with that buyer 
and with that chain. 

147 

Q And is part of the reason why you want to 
provide that same-day service is the fact that the 
customer can buy a smaller amount, knowing he can 
buy another amount the next day? 

A That’s right. 

Q So he doesn’t have the shrink and it looks like it’s 
one- or two-day-old mushrooms? 

A And doesn’t have the inventory investment, 
which is very important. Inventory turns are a critical 
measurement of buyers of any item at retail but, for 
these buyers, about the same token. 

Q Okay, can you explain that inventory turn? 

A Well, how much inventory do they sell—I mean 
how much product do they sell and how many pounds 
do they have in inventory. If they are turning inven- 
tory every day, they would get 365 turns per year. If 
they turn it once a week, they get 52 turns per year. 
Obviously, the more turns the less [3-608] investment 
they have at any point in time. 

Q Does Pictsweet have its own transportation? 

A We sure do. The drivers are an integral part of 
the service factor. We own our own trucks, the drivers 
are employees. And the drivers are like every other 
employee in every one of our farms, they are sharing in 
the profit. Twenty percent of the profits are distri- 
buted to the employees every quarter So the drivers 
have a vested interest in, not only their jobs, but their 
quarterly bonus. And their quarterly bonus has been in 
double-digit percentages on some quarters. 

148 

It’s been very much part of our service and mar- 
keting factor is to have these drivers, as well as the 
other employees, dedicated to providing the best level 
of service every day, every week, every month. 

Q Does Pictsweet sell any mushrooms east of the 
Rockies? 

A No, we can’t transport mushrooms all distances; 
no one can very well for two reasons. One is the 
quality, the shelf life. Long transit times increases the 
bruising, it also costs more money. 

Mushrooms have a density factor. You [3-609] 
take a 45- or 48-foot refrigerated trailer, which is what 
most of the over-the-road trailers are, 22,000 pounds, as 
opposed to frozen vegetables at 45,000 pounds. So your 
transportation costs on a per-pound basis are very high. 

Q Since you got into the business in 1991, has the 
cost of production of mushrooms per square foot de- 
creased? 

A Well, I can only speak for— 

Q Okay. 

A And ours has dropped dramatically. There’s 
several reasons for it. Yield is the primary driving 
force behind the cost. You have the same input cost 
and the more you get out of those inputs, the less your 
cost per pound is. 

If you get three pounds per square foot, or you 
get six pounds per square foot, the only difference is 
picking and packing, everything else is the same. Also, 
our costs are down dramatically because our profit- 

149 

sharing program has reduced our Workmens’ Com- 
pensation expenses, Workers’ Compensation expenses. 

That’s been a very big problem in California and 
we have been able to focus our employees on the fact 
that they have a vested interest [3-610] in helping us 
provide a safer workplace. So the combination of those 
factors have driven our costs down dramatically. 

I don’t know if everyone else can say that or not. 
If they can’t, they are missing a great opportunity. 

Q During the time that you’ve been in business, 
have better varieties come out? 

A Yes, the strains; the spawn-makers are working 
to provide spawn that has higher yields and better 
quality. But they can only do so much and, once they 
deliver that spawn, then the grower has to take that 
spawn and, with good management and growing 
techniques, take it the rest of the way. 

Q Do you believe, over the four-plus years that 
you’ve been there, that the quality has increased? 

A The quality definitely increased. As we’ve in- 
vested in our farms, we’ve invested in those things 
which improve quality, air-handling capability, cooling 
capability, transportation capability. 

Q Have you found that that increased quality 
causes retailers to pay more money and buy more pro- 
duct? 

A It’s caused retailers to be pleased with [3-611] 
the service we provide, the quality we provide, and it’s 
been good for the consumer. 

150 

Q You touched on it a little bit, the one that makes 
that vegetarian burger, but could you describe the 
types of markets serviced by Pictsweet in the fresh 
market? 

A We get to market total crops. And, when our 
harvesters are in the growing rooms picking, they make 
on-the-spot determinations of size and of quality, large 
and mediums—I’m sorry—jumbo and large, medium 
and small, and then No. 2 product. So you’ve got a 
range of quality right off the beds that you have to deal 
with. 

And then, when you go through the packing 
process, it’s also a sorting process, and you accumulate 
more product that is what we refer to as No. 2. That’s 
not a USDA number, that’s our—that’s an industry 
standard but it’s not USDA-driven. So you have to deal 
with that entire product. 

Our predominant market is the retail market and 
it’s that way because we’ve got Pictsweet frozen foods 
in the frozen vegetable cabinet, we’ve got Pictsweet 
mushrooms in the produce cabinet, we can do cross- 
merchandising between the two. We do—the wholesale 
market is a good market for us. The [3-612] foodservice 
figures is a good market for us. The process market, for 
those who are taking the mushrooms and commercially 
cooking or freezing or brining or—that’s a good market 
for us. 

Now, it’s not a good market for us if we have to 
go to the mushroom use of last resort. 

151 

Q When you’re talking about these other process 
markets, you’re not talking about the 35-cents-a-pound 
stuff that Mr. Cirini was talking about? 

A Only the last resort. 

Q Okay. The other process market that you’re 
talking about was—describe that again, the ones that 
are freezing, cooking? 

A Well, we have a customer—I mentioned it ear- 
lier, I go back to that one—we have a customer in the 
northwest who takes mushrooms and makes a meat 
substitute and that meat substitute can be a burger, it 
can be taco mix, it can be sausage; they change the 
seasonings but it’s basically our mushrooms, brown- 
rice, onions, and spices. 

They are very successful. It’s extremely suc- 
cessful and we’re going with them. They want to triple 
their business in the next three years and they want us 
to tell them next week how we’re going to supply them 
with three times the amount of mushrooms 

* * * * * 

[3-615] 

— he’s not going to do it. 

BY MR. LEIGHTON: 

Q Can you describe what Pictsweet does to help 
Pictsweet increase sales? 

A That’s our business, increase sales. 

152 

Q Whether we call it advertising, promotion, what- 
ever, whatever you do to help Pictsweet sell more 
product. 

A Demand—we want to increase the amount of 
pounds that we sell and increase the amount of revenue 
that we receive for those pounds. 

Well, it’s an all-inclusive process. I don’t know 
how you say that it’s just this and just this and just this. 
It includes everything we do. 

We preach two things to our employees: Take 
care of the crop and take care of the customer. That’s 
why we have an incentive program at the farm, that’s 
why the profits are shared, that’s why we control our 
transportation, that’s why we have a direct sales 
force—we don’t have brokers, we have a direct sales 
force. That’s why the customers talk directly to our 
sales force, they don’t talk to a third party, they don’t 
talk to intermediaries, they talk directly to our sales 
force. That’s why we’re structured as individual 
business units and not one [3-616] large mushroom 
growing entity, but three separate mushroom growing 
entities. 

That’s why we deliver every day of the week; 
that’s why we’ll deliver twice to some markets that the 
markets require, like Fridays in Los Angeles, we’ll 
make two deliveries a week—a day. 

We work with the retailer, we work with the 
wholesaler, we structure a marketing and merchandis- 
ing plan for each individual customer. No two 
customers are alike. Some retailers have an every-day 
low price strategy, some have a promotion program. If 

153 

they have a promotion program, we give them rotating 
programs, cents-off. 

I believe Reitnauer yesterday called it off- 
invoice allowances. Well, we—it’s a price reduction, 
that’s all it is. We do all of that. We provide pro- 
motional material, we provide point-of-sale materials, 
we provide paper bags because mushrooms are 
stored—the shelf life is longer if they’re stored in 
a—hold them in the refrigerator in a paper bag rather 
than the plastic roll that’s at the supermarket. 

There’s many ways to promote the sales and 
increase the volume. 

Q Now the promotional material that you [3-617] 
provide to the retailer, is that promotional material that 
Pictsweet paid for? 

A Well, we’ve had our promotion material since 
we’ve been in business. And we try to keep it updated 
all the time. 

Q So you provide promotional material to them; 
correct? You give them price discounts when those 
types of stores that want to go on sale want to go on 
sale. 

A Right. 

Q Do you do any like joint advertising with them? 

A Well, we do provide money for best-food-day ads 
so that our brand name is in the ad. Yes, we do that. 

Q And you pay a portion of the cost of that ad; 
correct? 

154 

A That’s right. 

Q Do you also, as part of your promotions, rotate 
the types of mushrooms sold? 

A Sure. Sure, we—if a customer—if a chain store 
has a promotion program and not an everyday old price 
program, you’ll see their ad on Wednesdays or Thurs- 
days in the newspaper. It’s called best-food-day. Some 
markets, it’s on Wednesday and [3-618] some markets, 
it’s on Thursdays. 

We pay a fee to have mushrooms in that ad. 
Now, if we have a hundred percent of that customer’s 
business, we have our brand name in that ad. If we 
share that business, we don’t. 

Now, you don’t have a lot of customers sharing 
accounts. Most of our retailers—let me go back. All of 
our retailers, we either have a hundred percent of the 
business or we share that business with one other 
grower. 

Now, that other grower may have a minority 
position or a majority position or we may share equally. 
But there’s not an undetermined number of mushroom 
growers servicing retail accounts in Phoenix and Los 
Angeles and Denver and Salt Lake City and Boise and 
Portland and Seattle. Now I can’t speak for the rest of 
the country and I don’t pretend to because we’re not 
national, we’re regional. 

Q What are some of the other product differentia- 
tions that you make to help promotions? 

155 

A Well, we promote different items. We don’t 
promote eight-ounce button mushrooms every rotation. 
We might do sliced and we might do stuffers. 

Q What are stuffers? 

[3-619] 

A Stuffers are jumbo mushrooms; you turn the cap 
over and you put something in there that’s probably not 
really good for you, like cheese or some fattening item, 
because you don’t have any fat in the mushroom so 
most people will take something that is fat and add it to 
it. But it’s a holiday item so it sells very well sea- 
sonally. 

Now, two things I heard yesterday I think I 
need to make sure that I set the record straight from 
my perspective. 

It is seasonal; there is a seasonality. And the 
reason it’s seasonal is, sales are driven by shelf space 
and, during the times of the year when you’ve got local 
produce, local cherries, local apples, local green beans, 
there’s a lot of items competing for a definite amount of 
linear feet. 

Now mushrooms get squeezed in, get squeezed 
out because, you know, we’re there every day, we’re 
there every month. So the retailer depends on us in our 
market to be almost accordion-like, we can expand or 
we can contract. We want the most shelf space that we 
can get because it’s proven that the more linear feet 
you have, the more attention you’re going to get, the 
more likely it is that a shopper is going to stop in front 
of your mushroom section and [3-620] look and buy. 

156 

Because it is an impulse item. It looks good, it’s fresh, 
attractive price, perceived good value built in the 
product. 

The other thing is, you sell more when it’s on 
promotion and it does not have a negative impact on the 
following week. And the reason that is, it’s just 
common sense, you have a definite shelf life, if you buy 
two packages this week because they are on a reduced 
price, if you want mushrooms next week, you better not 
go back to the refrigerator and try to use those 
mushrooms that you purchased last week. They won’t 
look good, you won’t think they taste good, you might 
even think they don’t smell good. So the next week, if 
you want mushrooms, you’ve got to buy them again. 

So, if you had a promotion program in place and we 
do on a regular basis, rotating ads, you’re going to sell 
more in a given time and it’s not going to have a one- 
for-one impact on future sales. 

Q So you disagree with same of the testimony 
yesterday? 

A Those two items are right in my mind, 
seasonality—it is seasonal. Holiday time, we couldn’t 
sell enough, we couldn’t have enough mushrooms on 
hand to service our customers during [3-621] Thanks- 
giving week and Christmas week. We always run out. 

Q In the fresh mushroom industry, approximately 
what size is Pictsweet? 

A I suspect that, total pounds grown, we’re third. 
I suspect we’re third. 

Q Is that overall mushroom industry? 

157 

A I would guess. Campbell is—well Campbell’s 
representative said they were the largest. Monterey 
says they’re the largest. I won’t argue, they’re the 
largest two and we’re happy to be third. 

Q But there are certain periods of the year that 
you can’t produce enough? 

A No. No, no, no, no. The holiday time is a time of 
special meals and mushrooms provide a special element 
for that meal, they enhance the meal. It’s also a time 
when people who might be marginally attracted to 
mushrooms but think they are out of their price range, 
they’ll splurge at holiday time. You know, it’s Christ- 
mas, it’s Thanksgiving, they’ll do it because of that. 

Q And have you found that, when you have done 
these promotional pieces, whether it’s a price discount 
or going on ad, that consumption of mushrooms 
increases? 

[3-622] 

A Definitely, without a doubt. 

Q And do you believe that it does not decrease 
consumption, then, the following week? 

A Those mushrooms which are purchased on ad, 
the additional quantities that are purchased because of 
the price being offered to the consumer, will not replace 
nor substitute the following week’s purchases. If they 
are going to purchase the following week, they cannot 
displace that purchase with inventory on hand in their 
refrigerator. 

158 

Q Now is that just your opinion or have you spoken 
with the retailers? 

A That’s our retailers’ belief. 

I believe that, our retailers tell us that, our statistics 
show that. Our relation with our retailers is excellent; 
if it wasn’t, we wouldn’t be their primary source of 
mushrooms. 

Q Do you also provide recipes? 

A Sure. 

Q Okay, and that’s at your cost? 

A Sure. 

Q Do you do in-store promotions? 

A In-store promotions, you mean— 

Q Well, in-store demonstrations? 

A Right, we do. 

[3-623] 

Q And have you found in-store demonstrations— 
do you believe that that increases the number of 
consumers that buy mushrooms? 

A And I guess I could possibly agree and disagree 
with Jack Reitnauer yesterday. There’s two reasons to 
do these in-store demos, I think. One, your retailer 
encourages you to do it and, two, the people you reach 
there, it’s the best opportunity to reach those that don’t 

159 

use mushrooms on a regular basis or maybe don’t even 
use them at all. 

You can entice people to try something that 
they’ve never tried before if you’re giving it to them 
free. That’s just human nature. So we do that on a 
systematic basis. 

Now it’s not going to give you this quarter’s 
results, it’s going to give you a long-term benefit, it’s 
going to cement your relationship with the retailer, and 
it’s going to provide those shoppers who maybe 
wouldn’t spend $2.00 for a pound, they might even take 
your sample, and when we do that we also give them a 
recipe that they can try, and maybe even a coupon for 
25 cents off their first purchase. 

Q So, when someone tries one of your mushrooms 
in the store, tries one of the mushrooms during the 
demonstration, you may give them a coupon [3-624] for 
like 25 cents off? 

A Right. 

Q Does Pictsweet keep track of the redemption 
rate? 

A Right, we do. There’s a clearing house for cou- 
ons. You know, coupons, every Sunday you can use, 
like when you’ve got a sheet of coupons. I read where 
the big national companies say that two or three 
percent redemption rate is good. 

But, when you hand that coupon to a customer, a 
potential customer or a current customer, in the store 
or at a food show—you know, most of the big chains 
have annual food shows, most of the big cities, most of 

160 

the wholesalers, they have food shows and they have 
thousands of people come to these food shows and we 
always participate in those—and hand coupons out and 
hand recipes out, you hand free food out, these coupons 
come back to us 10, 15 percent. 

Now, that’s not a hundred percent, that’s a long 
hundred percent, but it’s five, six, seven times the 
annual redemption rate on Kellogg’s Corn Flakes. 
That’s what I read and that’s only what I know. 

Q Now all of these things that you have described 
as to what you do to promote and increase [3-625] the 
consumption of mushrooms, does that cost Pictsweet 
money? 

A Sure. 

Q Do you believe, as President of Pictsweet, that 
Pictsweet knows best how to survey the customer? 

A Sure. 

Q Do you believe that Pictsweet knows best how to 
increase the consumption of mushrooms with your 
retailer? 

A Oh, most definitely. 

MR. LEIGHTON: Your Honor, may I approach 
the witness, please? 

JUDGE BERNSTEIN: Yes. 

MR. LEIGHTON: I would like to show you 
what’s been marked as PX No. 7. 

161 

(Whereupon, Petitioner’s Exhibit No. PX-7 
was marked for identification.) 

JUDGE BERNSTEIN: I think I have copies of—I 
had copies of 7. 

MR. LEIGHTON: No, this is a brand new one. 

JUDGE BERNSTEIN: Okay. You had . . . . 

* * * * * 

[3-632] 

where they squeeze the section down and it’s a rifle 
approach; you can’t shotgun it, you’ve got to rifle it, not 
only with the chains but with the individual stores. It 
has to be a rifle approach, rifle merchandizing not 
shotgun merchandizing. 

Retailers are very knowledgeable about their 
business. 

Q Have the Pictsweet’s marketing efforts changed 
since the formation of the Mushroom Council? 

A No. No, we couldn’t afford a change and I don’t 
think anyone’s changed their marketing efforts. We 
have to keep focused in moving product. 

Q Is that what your retailers expect? 

A I don’t think they’d allow us to do anything else. 

Q Have you spent any less money on your mar- 
keting efforts since the Mushroom Council was formed? 

162 

A Only the assessment. Our own direct efforts 
have not changed. 

Q You would do that anyway? 

A Certainly. 

Q So the only cost increase is the assessment 

A That’s right. 

[3-633] 

Q What is Pictsweet’s position with respect to the 
attempt to put together the Mushroom Council? 

A Well, we were a forthright, obvious from the 
very get-go opponent of it. We didn’t think it would 
work in this industry; and we still don’t. But we 
certainly have—I’ve certainly used my talents, as 
meager as they may be at times, to fully support the 
Council; and I think everyone would agree with that. 
I’ve served— 

Q You still don’t believe it will work? 

A I don’t believe it will work in an industry such as 
fresh mushrooms where it’s a regional business. Each 
market is different, you have to focus on that market 
and you can’t use the same techniques in every market. 
It’s a regional business. 

Q Before we get into that again, let’s get back to 
your opposition. Did you talk to USDA about how you 
opposed it? 

A Yes, we did. We were open, and we still are; 
we’re forthright; and we lost in referendum. 

163 

Q Did you testify in Congress? 

A Yes. 

Q Who was the proponent of the—what Con- 
gressman was the proponent of this Council? 

A I don’t think I know that. 

[3-634] 

Q Was he from Pennsylvania? 

A I think so but I can’t call his name. I know he 
was from Pennsylvania; I can’t call his name. 

Q Is Pennsylvania the biggest mushroom-pro- 
ducing state? 

A The USDA statistics, 47 percent of all the 
pounds grown in the U.S. are grown in Pennsylvania 
and predominantly in eastern Pennsylvania. 

Q Are they fighting over a lot more markets than 
what you’re fighting for out here on the west coast? 

A Obviously, obviously. They’ve got 47 percent of 
750 million pounds, they have to struggle. I’m sure they 
have to struggle. I can’t identify with them because I’m 
not there, never have been there, never participated in 
that market. 

Q And California is what percent? 

A Seventeen percent of the national. So you’ve got 
47 and 17, that’s two-thirds, I guess. 

164 

But that 17 percent is skewed toward the Bay 
Area. There’s one or two farms in San Diego County, 
we’re in Ventura County, I can’t think of another farm 
until you get to the San Jose area. 

Q What about east from L.A.? You service 
Phoenix; do you know if anybody else services Phoenix? 

[3-635] 

A Monterey services Phoenix and ourselves, that’s 
the only two. 

Q Does anybody else service Denver? 

A There’s a farm in southern Colorado who has 
serviced the Denver market; it’s their primary market. 
We service it from Fillmore, Utah, and Monterey ser- 
vices it from the Watsonville and Morgan Hill, Cali- 
fornia farms. 

Q Do you service San Francisco at all? 

A No, we don’t. 

Q That’s how regional it is. You have a farm a few 
hundred miles away but you do not service San 
Francisco. 

You testified in opposition to the program in 
Congress? 

A Uh-huh—yes, I did. 

165 

Q Was it just your position or was there a body of 
people that—United or Pictsweet—that agreed with 
you? 

A Well, it was our company’s position, it’s my 
personal position and it was our company’s position. 
And although we were obviously the open opponent, 35 
percent of the growers voted in opposition to the 
program. 

Q Now you lost in the referendum; correct? 

[3-636] 

A Right, we did. 

Q And did United go so far as to attempt to get a 
list of the producers to lobby the producers? 

A Yes, we did. 

Q Did USDA give you a list of the producers? 

A No, they did not. 

MR. COOPER: We’re getting into— 

JUDGE BERNSTEIN: We’re getting into an 
area that we agreed would not be relevant to this 
proceeding. 

MR. LEIGHTON: We’re just talking about the 
support in the industry, Your Honor. 

JUDGE BERNSTEIN: I don’t want any further 
into what happened in the course of the referendum. 

166 

MR. COOPER: I’d like to have that last question 
and response struck. It’s irrelevant to this proceeding 
and I don’t think it’s completely accurate. And I don’t 
see a need to explore it on our examination to 
straighten out something that isn’t relevant. 

JUDGE BERNSTEIN: We’re not going to go any 
further into this— 

MR. LEIGHTON: That’s right - 

[ 3-637] 

JUDGE BERNSTEIN:—in terms of— 

MR. LEIGHTON: That is correct. 

JUDGE BERNSTEIN: Okay. 

MR. COOPER: So the court, therefore, is not 
striking the answer. 

JUDGE BERNSTEIN: I don’t recall the ques- 
tion. 

MR. COOPER: He said the USDA would not 
supply a list, I believe, and I think our position is 
somewhat contrary. 

JUDGE BERNSTEIN: I don’t find that to be 
relevant to the issues of this case. Whether or not they 
supplied a list is, in my mind, irrelevant. 

MR. LEIGHTON: Your Honor, I think it’s 
marginally relevant for the following reason: Is that 
USDA, in response to these petitions and in briefs and 
stuff like that, they talk about the fact that how, you 
know, the program had the overwhelming support of 

167 

growers and things like that. And they will announce 
that they had 65 percent in this referendum. 

The 9th Circuit Court of Appeals, in another Cal 
Almond decision when Cal Almond attempted to get 
the list of growers of almonds and USDA refused to 
provide it, and the program—the suit went up to the 
9th Circuit Court of Appeals and the 9th Circuit [3-638] 
Court of Appeals said the First Amendment required 
that the list be provided to allow people, proponents 
and opponents in the industry, to lobby against the 
legislation just like you would have if there was 
referendum. 

So I want the record to be clear, when USDA 
purports to talk about how many people supported the 
program, that USDA refused to provide the list of 
producers so people could lobby the producers and tell 
them what’s going on. 

MR. COOPER: Well, quite the contrary, we did 
offer the list eventually and they refused to take it 
because of pending litigation I assume they had against 
the Department. 

JUDGE BERNSTEIN: It was my understanding 
that this would not be an issue and you’ve taken issues 
related to the vote from your petition. Therefore, I 
would consider this to be undue surprise to introduce 
this issue into evidence. 

MR. LEIGHTON: Okay. I’m just stating my 
position for the record. 

JUDGE BERNSTEIN: Okay. 

MR. LEIGHTON: So, we’ll move on. 

168 

BY MR. LEIGHTON: 

Q Now the referendum passed and what was [3- 
639] Pictsweet’s position with respect to the Mushroom 
Council at that point? 

A Well, by securing a position on the Council so 
that we could be involved in the process, so that we 
could protect our investment, so that we could make 
sure that the Council was accountable for their action. 

Q So did you run for the Council, or however that 
happens? 

A The process, basically, is I was nominated for a 
position. Two producers were nominated for each 
position in open regional meetings and then, from the 
two that were nominated, the Secretary of Agriculture 
selected one of the two. And I was selected to 
represent the Western Region. 

Q And who was the other nominee, or what entity? 

A Monterey Mushrooms. 

Q And, at the time the legislation went through 
and the time the Council was formed, was there any 
crisis in the fresh mushroom industry. 

A We didn’t think there was a crisis. We were 
excited to be in the business, still are. 

Q Were a bunch of growers going out of business? 

[3-640] 

A I don’t know. If those growers couldn’t keep up 
with the advances in yields and reduction in cost, I’m 

169 

sure they were getting left in the dust. But a lot of 
growers are in business and there’s a lot of people who 
are happy to be in this business. 

Q Was Pictsweet making money in 1992 and 1993? 

A 1991 was the most profitable year in a series of 
increasingly profitable years since we started. And 
since then, the years have been increasingly profitable; 
and 1994 was just as profitable. 

Q Now what did you do as a result of your ap- 
pointment to the Board by the Secretary of Agricul- 
ture? 

A Well, I adhered to the duties of Council mem- 
bers. I was elected Treasurer of the Council at the first 
meeting in Washington, I was chosen of one of three to 
serve as a selection recruitment committee for securing 
the President/CEO’s position. I secured a line of credit 
for the Council for their operating expenses up and 
until the time that the assessments starting flowing. 

Q Was that something Pictsweet did on its own? 

[3-641] 

A Yes. 

Q Pictsweet secured the line of credit for the 
Mushroom Council? 

A From my bank, a line. 

We prepared the financial statements on a 
monthly basis for the first month until the Sacramento 
office was opened and a local accounting firm was hired. 
A period of months, I can’t tell you how many months. 

170 

Q Did you do that for free? 

A Sure, yeah. 

I have attended all but two meetings and I’ve 
shown up at the appointed hour and I’ve stayed until 
the very end. I’ve been as supportive as I possibly 
could have been. 

I think I called the President/CEO, Mr. Whit- 
field, on a periodic basis; I’ve offered to help him any 
way I could. I offered my personal support to steer 
ideas that he thought were beneficial through the 
political process. I think I’ve done as much as I possibly 
could and I think I’ve done more than some others have 
done. 

You know, some of the Council members don’t 
seem to be as interested as I am and they were for it. 
They don’t come to all the meetings. They [3-642] have 
their own reasons, I’m sure. 

Q Now these meetings are held all over the 
country; aren’t they? 

A Yes. 

Q So it’s not a simple thing to go to a meeting. 

A No, it’s not for me. We have the meetings in all 
geographic areas but we’ve had a preponderance of the 
meetings in Sacramento, which I support because that’s 
our headquarters. So Sacramento is not a direct flight 
for me. So the travel arrangements have to be planned 
in advance; and they ought to be in advance. 

171 

Q Now you have been with the Council and on the 
Council and a competitor in the industry since the 
Council was formed. Do you think the Mushroom 
Council can do a better job with your assessment 
dollars than you can? 

A No. No. 

Q And is part of that opinion based upon what 
you’ve seen them do? 

A Well, you heard testimony this week that the 
results of the council activities haven’t increased con- 
sumption or increased— 

MR. COOPER: Objection, Your Honor—I’m [3- 
643] sorry. 

THE WITNESS: I agree with that; there’s is no 
measurable improvement or no—there’s no mea- 
urement to what’s been done, no impact. 

BY MR. LEIGHTON: 

Q And based upon what has been done, do you 
think there’s any effective way to even measure that? 

A That’s very difficult. I know all the strategic 
plans, and we have a measurement of the program—an 
evaluation of the program, and it’s one thing to say that 
you have a plan and you execute the plan; it’s another 
thing to say that the plan resulted in increased 
consumption. 

Now the—and I was very happy with this, I was 
very pleased—at the very first meeting we had, there 
was a unanimous agreement that we would measure the 

172 

Council’s performance on per capita consumption. And, 
if it did not go up, the Council had failed. And the five- 
year plan is to go from 1.9 pounds per capita to 2.1 
pounds per capita. 

Well, that sounded real good. I have to admit, I 
thought that was great, if we could do that that would 
be great. I just got—I overlooked one factor there and 
that is that we were already at two pounds based on 
USDA’s numbers. I should have caught [3-644] that; 
we all should have caught that. 

We’re an instrumentality of the USDA and the 
USDA say that it was two pounds. Well, one-tenth of a 
pound may not seem like much but you’re only talking 
about two-tenths of a pound. So we’ve already 
achieved half our goal before we even went into busi- 
ness in 1993 because 1992 consumption was two pounds. 
I just blew it; we all blew it. We should have seen that. 

But we are unanimous that it will only be 
successful if we increase consumption, per capita con- 
sumption. 

Q Per capita consumption. Your firm is increasing 
sales; correct? 

A That’s our job. 

Q And you have done that? 

A And we’ve done that. 

JUDGE BERNSTEIN: Let’s take a recess, we 
will recess for ten minutes. 

(Whereupon, a brief recess was taken.) 

173 

JUDGE BERNSTEIN: The hearing is back in 
session. 

BY MR. LEIGHTON: 

Q I understand the first big program that the 
Mushroom Council began was the Valentine’s program 
[3-645] purporting mushrooms to be aphrodisiacs; is 
that correct? 

A That’s right. 

Q Did you vote for that program? 

A No. 

Q Why didn’t you vote for that program? 

A Well, there’s several reasons. I think Mr. Whit- 
field yesterday said that it was because of it being an 
interim program; and he’s right. It was an interim 
program before we had a long-term strategy. 

And he had voiced his position that he didn’t 
think that an interim program that didn’t have a long- 
term strategy would be successful or be meaningful. 

And I thought the term “purporting it to be an 
aphrodisiac” was in poor taste. And it was. 

Q Did Pictsweet want to be associated with that 
message? 

A No. No. 

I asked the Council to reflect in the minutes that 
I was opposed to it and why. 

174 

MR. LEIGHTON: May I approach the witness, 
Your Honor? 

JUDGE BERNSTEIN: You may. 

MR. COOPER: This is a letter from–- 

[ 3-646] 

(Whereupon, Petitioner’s Exhibit No. PX-6 
was marked for identification.) 

BY MR. LEIGHTON: 

Q Mr. Haltom, is this a letter you wrote to Mr. 
Whitfield with respect to that Valentine’s Day 1994 
program? 

A It is. 

Q Another program that they had was the 
“Blueprint for Profits”? 

A Right. 

Q And did you vote in favor of that program? 

A I did. 

Q And did you have any concerns that it wouldn’t 
work? 

A Well, it was not something that was—it was not 
really a new program, it was a restatement of some 
very well-known, well thought of practices for 
merchandising fresh mushrooms. It was a schematic 
diagram. Mostly retailers, given their dictates, given 

175 

what, they need to do, they will try; they are interested 
in doing things like this. 

This has been an evolving program by [3-647] 
mushroom producers and I think, this was an attempt 
by the Council to bring it all together. 

Q Did you find many of your retailers already did 
things similar to that? 

A Yes, I did. And the ones that didn’t, I can’t tell 
you today that they’ve done anything different because 
of the blueprint that we gave them. I think they should 
but they’ve got a lot of other pressures. 

One of the pressures they have is all the 
proliferation of pre-packed salads and they take a lot of 
shelf space. So they’ve got their own concerns, they’ve 
got their own requirements. And what we told them, 
what the Council said for them to do would be good for 
the mushroom industry, but it’s a store-by-store, chain- 
by-chain business decision. 

Q Now has Pictsweet worked with retailers prior 
to the formation of the Commission as how to package 
the product, how to display it and those types of things? 

A I’m sure all growers have; it’s just part of the 
business, everyday business. 

Q Now this “Blueprint for Success” and how to 
operate that, is that the only way to be able to display 
mushrooms and market mushrooms? 

[3-648] 

176 

A No, no. There’s many ways to do it. This is one 
way and it’s a good way. 

Q Now, as a result of that project, did you find 
sales increased? 

A We couldn’t measure the benefit of it. 

Q Did any of your retailers think or tell you that 
they thought sales had increased? 

A They have not told me. 

Q Now do you recall any other programs that you 
know were approved by the Council? 

A We’ve done a lot of research—the Council’s done 
some research trying to establish the baseline so that 
the program can be measured in future years at to its 
success. 

Q What about some of the other promotional pro- 
grams that— 

A The public relations activities? 

Q Yes, that Robyn Wilk testified to yesterday. 

A I think, you know, Robyn expressed herself 
extremely well. She has done a tremendous job of 
getting the message out. You know, it’s confusing to 
me and it’s confusing to every one, if you measure the 
exposure, what does that translate into sales volume? 
She’s done a great job. I mean, she speaks [3-649] well, 
she’s knowledgeable, and she’d done a good job. The 
PR campaign is moving forward. 

177 

I don’t know if it will work. It makes you feel 
good because you look in the paper and you see the 
product that you sell and it does make you feel good. 
But I don’t know if it’s going to work. 

Q Have you seen any results of it yet? 

A We haven’t been able to measure the impact on 
our business. 

Q Do you believe that $1.5 million budget can 
influence the national market? 

A It doesn’t seem like it would be enough. 

Experts before me—and I’m certainly not an 
expert—they say it’s not enough. We don’t conduct a 
national campaign so I wouldn’t know. It seems to be 
meager. 

Q And, for example, like you have a big portion of 
the L.A. region, you have a big portion of the Portland 
and Seattle, Denver, Utah, Phoenix regions. 

A Right. 

Q Is a regional program in New York going to do 
anything for you? 

A Nothing. 

Q Is a regional program in L.A. going to do [3-650] 
anything for the Pennsylvania growers? 

A Nothing. 

Q And is that the way throughout the market in 
the United States? 

178 

A Obviously so. It may help Campbell. They said 
they like to think of themselves as national because 
they’re where the people are. It may help Monterey 
because they have farms in Tennessee and Texas. And, 
you know, they are semi-national. But it won’t help the 
other 157 or how many growers there are. I don’t 
guess anybody knows exactly. I don’t know exactly. 

Q Have you been involved in the Council meetings 
when it’s come time to vote on the budgets and 
determine the assessments? 

A Oh, sure, every one. 

Q Has the Mushroom Council ever raised the 
assessment rate? 

A No. 

Q What has been the discussion with respect to 
why not? 

A Well the conversation has been, “Let’s wait till 
we see some results.” It’s a quarter-cent, it started at a 
quarter-cent; it could have gone from a quarter-cent to 
a third of a cent to a half a cent [3-651] to one cent. So 
it’s only half of what it could be right now. 

And obviously, if the Council members thought 
that there was enough industry support, they would 
have optimized the level of assessment. Next year you 
go to one cent. We’re in the process now of developing 
a budget for next year. 

I can’t see any scenario where it would go higher 
than a half-cent, and it could be at one cent. And I can’t 
give you each individual Council member’s background 

179 

for why they think there’s not enough support. Obvi- 
ously, I want us to make sure that every dollar that we 
collect is spent in a way that will—because we are held 
accountable. 

So I want to see the program before we raise the 
assessment. 

Q And, at this point in time, you have to pay it; 
correct? 

A We do. 

Q So you want to make sure that it’s spent the best 
way you think it should be spent? 

A Certainly. 

Q Do you believe that growth in the fresh mush- 
room industry is naturally occurring? 

A Certainly. 

[3-652] 

Q The per capita consumption, why is that harder to 
achieve than increased sales? 

Now, increased sales increases your profits; 
correct? 

A Uh-huh. 

Q Per capita consumption may or may not increase 
your profits but it could. But why is it harder to in- 
crease per capita consumption based on the demograph- 
ics in the United States? 

180 

A The population segments that are growing the 
most dramatically, Hispanics, don’t include mushrooms 
in their daily diet. So, as the population of the non- 
Hispanic slows, the per capita consumption will be hard 
to increase. 

I think that’s why—looking backward, I think 
that’s why the Council members took such a small gain 
in per capita consumption from 1.9 to 2.1 for the full five 
years of the program. 

Q Can the amount of the Mushroom Council assess- 
ment reduce the amount Pictsweet can spend in its 
mushroom efforts? 

A It can’t reduce what we spend on our market pro- 
grams. 

Q You are going to spend that anyway; correct? 

[3-653] 

A Certainly. 

Q Could it have an impact on your expansion? 

A Well, I guess at some point the assessment would 
be such a burden that we’d have to curtail some of our 
activities such as capital improvements, but that would 
have to be judged on a year-by-year basis. I couldn’t 
say today that would happen but, obviously, if the 
burden of the assessment grew, we’d have to look at 
our total operations. 

Q Now based upon the assessment rate that has 
been prevalent in the last—since they formed the 

181 

Commission, does Pictsweet just consider that as a tax 
that comes off the bottom line? 

A Certainly. 

Q You make less money because of that tax? 

A Right. 

Q Although it’s statutory, does the Mushroom Coun- 
cil allow Pictsweet to receive a credit for any amounts 
of money that you spent promoting your mushrooms? 

A No. 

Q And do you believe that your monetary efforts in 
promoting your mushrooms has increased consump- 
tion? 

[3-654] 

A Well, sure, we wouldn’t do it if it didn’t. 

Q Since there is this program that’s mandatory if 
you produce more than a half a million, do you believe 
that the growers that produce less than a half-million 
pounds should also pay? 

A Well, they get a free ride. They benefit by it. 

Q Do you believe that the processors of mushrooms 
should pay an assessment? 

A I always have. 

Q Why is that? 

A They’re getting the benefit of it. 

182 

Q Now can you describe why you believe that the 
processors get a benefit out of the fresh mushroom 
assessment? 

A Well, if the program is successful, if it is suc- 
cessful, total mushrooms—or the way the consuming 
public perceives mushrooms will have to improve. And 
if it improves fresh, it’s going to improve all forms it 
would seem to me. 

Q Now have you seen the processed mushroom 
people benefit from any price increase in the fresh 
sales? 

A I don’t think I understand that question; [3-655] 
ask it again. 

Q Have you seen any of the processed mushroom 
people receive a benefit from the price of fresh sales? 

A No. 

Q Have you seen that—it was mentioned yesterday, 
let me bring up a situation. 

Do you recall when a major mushroom producer 
called Moonlight went out of business? 

A I sure do. 

Q Okay, what happened? 

A I believe, in 1993, they had a labor dispute and 
that led to a decision to close that farm. I believe the 
last day or the last month of business was December of 
1993. And they were producing at that time about 35 
million pounds a year. In the preceding years, they had 
produced as many as 50 million pounds. 

183 

Q In one location. 

A The largest single operation in the country. 

Q Okay. What happened when they closed down? 

A They closed down, the sales for those pounds 
were distributed among, I assume, other growers in the 
Pennsylvania area. Nationally, I think there [3-656] 
was a perceived shortage of mushrooms and probably a 
real shortage in some markets. 

The fresh price, I understand, in the east—we 
don’t sell there, but I understand that it had a marginal 
increase. The price of last resort, the price that Camp- 
bell’s would post or Monterey would post or somebody 
that would post a price and buy at that price on the 
given week, any given week, that price doubled, that 
price went from the 30-something cent range to the 60- 
something cent range. 

Obviously, when Campbell’s needs mushrooms 
for mushroom soup, they’re going to procure them. 

Q So is it true that the higher—the more demand 
there is for the fresh, the higher the price of the 
processed mushrooms go up? 

A Certainly. 

Q So the sellers into the process market will receive 
a benefit from the shortage of supply of the processed 
mushrooms? 

A There are three categories of growers; there’s 
growers like—I suspect there’s some growers in 
northern California that sell everything to retailers and 

184 

maybe some wholesalers. There are growers in 
Pennsylvania that sell nothing but [3-657] processor 
markets, they have contracts with Campbell’s; with 
Giorgio, which is a large processor; and their entire 
crop goes the processing route. 

Then there’s those in between like most everyone 
else who sell fresh, some processed contracts, and then 
the processor of last resort. 

So when the supply went down dramatically, the 
big gainers were those growers that just grew for the 
processing market. 

Q So the flip side of the same coin is, if the demand 
increases for fresh, the demand will increase for the 
processed? 

A Right. 

Q Do you believe that the people that sell the pro- 
cessed should pay an assessment? 

A Yes, I do. 

Q Are any of the other fruits and vegetables that 
Pictsweet sells required to pay an assessment for 
promotion programs? 

A No. 

Q Mushrooms is the only one? 

A Only one. 

Q Now you were present when Dr. Ward testified 
regarding some of the criteria that he looks at to 

185 

determine a rule of thumb as to whether or not a [3-658] 
generic program would work? 

A I was present. 

Q One of the things he stated that a generic pro- 
gram would work if it’s a homogenous product; did you 
hear him testify to that? 

A He did. 

Q Do you believe that mushrooms, as sold in the 
marketplace today, are homogenous? 

A No, they’re not homogenous, there’s different 
varieties, there’s mushrooms that are called exotics 
that sell for $3-4.00 a pound, there is levels of service 
that are attached to all mushrooms that make their 
value different and make them non-homogenous. 
Different forms, different levels of service, different 
varieties— 

Q Packaged differently? 

A Different package types and styles. 

Q One of the things you heard from one of the 
studies that was done by one of the groups is that some 
consumers didn’t like the fact that they have to slice 
mushrooms; correct? 

A Right. 

Q You do provide that service; correct? 

A We have sliced mushrooms in our line. It amounts 
to about ten percent of our total sales now. 

186 

[3-659] 

Q Okay. So you have satisfied that demand for 
those consumers without the Mushroom Council? 

A Right. 

Q Now one of the other points that he brought up is 
that, for the program to work, it should be like the same 
grades and standards because, if you have a super good 
quality and a real poor quality based upon different 
grades, the generic program is less likely to work; did 
you hear that testimony? 

A Right. 

Q Now could you explain mushrooms as it fits into 
that criteria? 

A Mushroom quality is subjective. You have a No. 1 
product and what could be a No. 1 for grower-A might 
not be what another grower would think would be a No. 
1 product. 

You have product—you have mushrooms that are 
picked today that are No. 1, they don’t sell today, if 
they’re held in the cooler for a day or two, they might 
be downgraded. They might not look as good, they 
might darken, they may change, very different ideas 
about the quality based upon the eyes of evaluator. 

Q Have you found that that downgrading in the 
quality, turning brown and those types of things, [3- 
660] does affect the consumption or the sales of that 
product? 

187 

A Certainly. Certainly; it’s an impulse item. If it 
doesn’t look good in the cabinet, people won’t buy it. 
They won’t; they won’t buy it. It’s not an essential part 
of their life and their diet. 

Q Now he also discussed the fact that a generic 
program won’t really work if you have a person in the 
industry that has the monopoly or the—oligopolistic; 
did you hear his testimony regarding that? 

A I did. 

Q Now, in the mushroom industry that is not true 
with respect to the entire nation; is that correct? 

A That’s right. 

Q Is it regionally? 

A In every market that we participate in there is a 
very limited number of growers. If I would look at each 
market individually, and I guess I should just to explain 
who our competitors are or how many competitors 
there are, because it varies by market. 

In L.A., San Diego, southern California, there’s 
three of us that have 95 percent of the business and the 
other five percent, one, sometimes [3-663] assume that 
they have a variety of sole-supply customers and major- 
ity positions and minority positions, just like we do with 
the few growers that we have in our markets. 

Q And what about New Orleans? 

A I would think—and I don’t know this, I’ve been in 
the New Orleans market, Monterey has a farm in east 

188 

Texas and, given the geographic area, I’m sure they 
have a preponderance of that market. 

Q Now you mentioned barriers to entry and one of 
the things Dr. Ward stated, that the barriers to entry 
are high, it is more difficult to have—a generic program 
is more likely because, as he explained it, that, if the 
price is increased, it’s harder to take advantage of that 
price increase because of— 

A I understood him to say that. 

Q —cost to get in there. Did you hear him testify to 
that? 

A Yes. 

Q Explain that as far as mushrooms go. 

A Well, I’m going to give you an example. 

Moonlight went out of business in December of 
1993. There was an immediate in reduction in supply of 
35 million pounds. Now those growers who [3-664] 
participate in that northeastern market who are on the 
Council—I don’t know many others except the Council 
Members—they told me that there was growing space 
that was not in production that made up 20 million 
pounds three months after Moonlight shut down. 

We personally have the ability to increase our 
square footage on a short-term basis, three or four 
months. 

Q And is that where most of the capital investment 
has already been put out, you just have some excess 
space available? 

189 

A Well, in Pennsylvania, as I understand it, they 
had some rooms out of service, they would have to 
improve the quality of the air handling in those rooms, 
improve the quality of the bed structures, and that’s 
just the carpentry work and buying some air condi- 
tioning. 

Q Now if, for example in the mushroom market, you 
have some excess capacity that you’re not using right 
now; correct? 

A That’s right. 

Q Okay. If you saw that mushrooms that you only 
got $1.29 a pound for all of a sudden went to $1.59 and 
you saw that, would you grow more? 

A We would grow more. We are growing more [3- 
665] now. I mean we are continuing to bring our level 
of production up through improved growing techniques, 
through improved air handling, and we have some 
space that we could add. As we go, we will be adding it. 
If we saw a sharp spike in our opportunities to sell 
mushrooms, we’d have the space up in just a few 
months. 

Q Okay. And the space that you already have but 
perhaps you’re not actually growing mushrooms, how 
long will it take you to get that extra production if 
today you decided, let’s grow some more? 

A I’m going to make the assumption that the 
hardware is on the shelf, and it more than likely is, four 
months. If it’s manufactured air handling equipment, 
six, seven months. 

190 

Q As opposed to like in tree fruit, it takes seven 
years to get a tree up to production. 

A That’s what I’ve heard in this room, yes. 

Q Okay. 

A Right. 

Q And have you seen short-term responses to price 
increases? 

A What do you mean by short-term responses? 
From whom? 

Q Well, on these price increases, getting [3-666] 
back to what we’re doing, that, if there is a shortage, 
we know, based upon what you stated, you could have 
—you could fill that void within a few months with the 
space that’s currently available. 

A Uh-huh, right. 

Q So I guess it’s probably my same question that 
there is a short-term response. 

A Well, the Moonlight is a real, live example that 
everyone knows about in this industry. They went out 
of business; within a matter of weeks, production 
increased to make up half of that. And I’m sure that, if 
they had stayed out of business, there would have been 
other space that would have gone in that would have 
made the entire national supply the same as it was 
before. 

Q If a vote was held today as to whether or not the 
program should be terminated, how would you vote? 

191 

A We’d vote to terminate the program. 

Q You think you can do a better job with that 
money than the Council can? 

A We’ve said it all along, I still believe that. 

MR. LEIGHTON: Nothing further, Your Honor. 

192 

UNITED STATES DEPARTMENT OF AGRICULTURE 
BEFORE THE SECRETARY OF AGRICULTURE 

MPRCIA Docket No. 96-0001 

IN RE: UNITED FOODS, INC., 

A DELAWARE CORPORATION, D/B/A 

PICTSWEET MUSHROOM FARMS, PETITIONER 

[Filed: Aug. 1, 1996] 

SUMMARY OF TELEPHONE CONFERENCE 

In an August 1, 1996, telephone conference with 
Brian Leighton and Gregory Cooper, counsel for the 
parties, I told counsel that it appears that this matter is 
similar factually to the case of Donald B. Mills, Inc., 
MPRCIA Docket No. 95-0001, which I decided on April 
26, 1996, and reconsidered by written decision on June 
12, 1996. I proposed that, based upon stipulated facts, I 
render a decision which would be similar to the Mills 
decision and then if it is decided upon appeal, as 
respondent contends, that my decisions are erroneous, 
the decision in this case along with the Mills decision 
could be reversed. 

Mr. Cooper recommended that I stay this matter 
pending guidance of appellate courts. Mr. Cooper 
stated that the facts in this case may be somewhat 
different and that in Mills it did not contest testimony 
by United Foods because it did not feel like as much 
was at stake with respect to United Foods. Mr. 
Leighton stated that essentially my decision in Mills 

193 

was that the government program was not effective 
and not narrowly tailored and that decision would apply 
regardless of how good or bad Pictsweet’s program is. 

Since there is a disagreement between counsel as to 
what facts, if any, need be decided in this matter, I 
directed counsel to brief the issues. 

It was agreed that Petitioner will file a brief on or 
before September 3, 1996, and Respondent will file a 
brief on or before October 2, 1996. Petitioner’s brief 
will state what facts, if any, I need find in order to 
render a decision in this case and why I can make such 
findings. Respondent will indicate what questions of 
fact must be decided before a decision can be made. 
Based upon these briefs, I will decide whether or not 
this case can be decided without hearing. 

/s/ EDWIN S. BERNSTEIN 

EDWIN S. BERNSTEIN 
August 1, 1996 Administrative Law Judge 

194 

IN THE UNITED STATES DISTRICT COURT 
FOR THE WESTERN DISTRICT OF TENNESSEE 
EASTERN DIVISION 

Case No. 96-1252 

UNITED STATES OF AMERICA, PLAINTIFF 

v. 

UNITED FOODS, INC., DEFENDANT 

Case No. 98-1082 

UNITED FOODS, INC., PLAINTIFF 

v. 

UNITED STATE OF AMERICA, THE 

UNITED STATES DEPARTMENT OF AGRICULTURE, 
DEFENDANT 

[Filed: July 9, 1998] 

AFFIDAVIT OF DONALD DRESSER 

Donald Dresser, being duly sworn, states under oath 
as follows: 

1. I am the Executive Vice President of United 
Foods, Inc. (“United Foods”). I have been with United 
Foods since 1985. I received my undergraduate degree 
in economics from the California Institute of Technol- 
ogy. I received my law degree from Harvard Univer- 

195 

sity. Before I joined United Foods, I practiced law in 
the fields of antitrust and economic regulation. 

2. I was the person primarily responsible for United 
Foods’ acquisition of its mushroom business in 1987, 
and I am familiar with the operation of United Foods’ 
mushroom business. Because of my background and 
my job responsibilities at United Foods, I am also 
familiar with the economics of the mushroom industry. 

3. I am knowledgeable of the COMPLAINT FOR 
REVIEW OF AGENCY ACTION AND FOR DECLARA- 
TORY RELIEF filed by United Foods in this action 
“United Foods’ Complaint”), and all facts stated in that 
Complaint are true and correct to the best of my 
knowledge, information and belief. The statements 
contained in United Foods’ Complaint are incorporated 
herein by reference. 

4. The mushroom industry is a competitive, unregu- 
lated industry. Other than regulations affecting food 
products generally, in the mushroom industry there are 
no regulations governing such matters as the quality or 
grades of mushroom products, packaging, advertising, 
pricing, production levels, or the orderly disposition of 
surplus product. There is no regulation of the mush- 
room industry that specifically controls the supply of or 
demand for mushroom products, competition within the 
industry, or the manner in which mushroom products 
are sold to the consuming public. 

5. In 1990 Congress enacted the Mushroom Law, 7 
U.S.C. §§ 6101-6112. Pursuant to the Mushroom Law, 
the United States Department of Agriculture (the 
U.S.D.A.) promulgated the Mushroom Promotion, 
Research, and Consumer Information Order at 7 C.F.R. 

196 

§§ 1209.200-.280 (the “Mushroom Order”). Under the 
Mushroom Order, there was formed a Mushroom 
Council, which is a committee of mushroom producers 
(some of whom are competitors of United Foods). The 
Mushroom Council exists to collect assessments from 
non-exempt mushroom producers, such as United 
Foods, and to use the monies so collected to develop 
industry-wide (i.e. nationwide) promotion, research and 
consumer information programs for mushrooms, osten- 
sibly to stimulate the demand for fresh mushrooms. 

6. The Mushroom Law is “free-standing” legislation, 
in the sense that it provides only for the compelled 
generic promotion and advertising of fresh mushrooms 
to the consuming public. The Mushroom Law does not 
contain any provisions for the regulation of any aspect 
of the mushroom industry, and it is not ancillary to any 
regulatory scheme designed to establish or maintain 
orderly marketing conditions for the industry. 

7. In this action United Foods is challenging on First 
and Fifth Amendment grounds the constitutionality of 
the Mushroom Law, the Mushroom Order, and the 
actions of the Mushroom Council for essentially three 
reasons: 

First, United Foods disagrees with and objects 
to the message conveyed by the generic advertising 
and promotional programs implemented by the 
Mushroom Council. Among other things, these ge- 
neric advertising and promotional programs portray 
mushrooms as a homogenous product, which they 
are not, and undercuts United Foods’ advertising 
and promotional programs for its own mushrooms 
which attempt to describe mushrooms and the 

197 

services provided by mushroom producers as 
differentiated products. 

Second, United Foods objects to the “free-rider” 
aspects of the Mushroom Order. Among other 
things, mushroom producers who produce less than 
500,000 pounds of fresh mushrooms per year are 
exempt from assessments. Additionally, mushroom 
producers who sell their product into the processed 
mushroom market (as distinguished from the fresh 
mushroom market) are exempt from assessments on 
those sales. To the extent any benefit can be 
realized from the Mushroom Council’s programs, 
those benefits will be enjoyed by these “free-riders” 
who are exempt from assessments. For reasons 
explained below, the processed mushroom pro- 
ducers potentially stand to realize greater benefits 
from the Mushroom Council’s programs than fresh 
mushroom producers. 

Third, United Foods objects to the Mushroom 
Council’s programs because they are ineffective and 
serve no valid governmental interest. 

To understand United Foods’ objections to the Mush- 
room Order and the Mushroom Council’s programs, it is 
important to understand the economic structure of the 
mushroom industry and United Foods’ position in the 
industry. 

8. Mushrooms are different from other agricultural 
products in several respects, including the following: 

• Mushrooms are grown indoors in a controlled 
environment. Compared to other agricultural 
products, therefore, mushroom production is 

198 

not as influenced by weather conditions and 
other events beyond the producer’s control. 

• Because mushrooms are grown in a con- 
trolled environment, mushroom production is 
not seasonal except to the extent that con- 
sumer demand is seasonal. Mushrooms are 
grown throughout the year. 

• In economic terms, the “supply curve” of 
mushrooms is more “elastic” than many other 
agricultural products. This means that the 
supply of mushrooms in the market will rise 
or fall relatively quickly in response to a rise 
or fall in prices. This is due primarily to the 
fact that mushrooms have a relatively short 
growing cycle (approximately three months), 
and most producers have surplus capacity 
which can be quickly employed to increase 
production in response to market conditions. 

• Fresh mushroom sales are strongly influ- 
enced by the demographics of the market- 
place. Because mushrooms are not a neces- 
sary part of the diet and are considered to be 
a kind of luxury food item, certain popula- 
tions are significantly more inclined to pur- 
chase mushrooms than other populations; and 
for certain populations, sales or marketing 
efforts inevitably will be ineffective. 

9. There are generally three types of markets for 
mushrooms: fresh mushroom markets; processed mush- 
room markets; and the “market of last resort.” Fresh 
mushrooms are sold to retail grocery stores and will 
command the highest prices. Mushrooms for the pro- 

199 

cessed markets are initially sold to mushroom pro- 
cessors who will then process the mushrooms into such 
packaged products as canned mushrooms, freeze-dried 
mushrooms, mushroom soup, and the like. The “market 
of last resort” consists of large mushroom processors 
who are constantly in the market for surplus mush- 
rooms at quoted prices that are typically well below the 
prices prevailing in the other markets. At any one 
time, fresh mushroom prices might be in the range of 
$1.20 per pound, prices in the processed mushroom 
market might be in the range of $0.80 per pound, and 
prices in the market of last resort might be in the range 
of $0.30 to $0.60 per pound or below. The prices in the 
market of last resort are below the cost of production. 

10. Certain mushroom producers sell primarily to 
the fresh mushroom markets; others sell primarily to 
the processed mushroom market; and others sell to 
both markets. A producer who sells to the processed 
food market and/or the market of last resort will divert 
sales to the fresh mushroom market when market 
conditions change through either a decrease in the 
supply of or an increase in the demand for fresh mush- 
rooms. United Foods sells its mushrooms to both the 
fresh mushroom and processed mushroom markets. 
Our sales into the processed mushroom market are to a 
relatively small number of regular customers. Like 
other mushroom producers, United Foods sells as little 
as possible into the market of last resort. 

11. Fresh mushroom markets are regional, not 
national. Fresh mushrooms cannot be efficiently trans- 
ported for long distances for a number of reasons: they 
have a short shelf life; they bruise easily when trans- 
ported over long distances; and they are light weight 

200 

(or low in density and therefore bulky), which means 
that transportation costs are high when measured on a 
cost per pound basis. Fresh mushroom producers, 
therefore, must produce their mushrooms in the 
geographic areas where their regional markets are 
located. Thus, for example, United Foods owns and 
operates three mushroom plants which determine the 
three regional markets into which United Foods sells 
its product: (i) the Southern California and Arizona 
market surrounding United Foods’ mushroom plant in 
Ventura, California; (ii) the Pacific Northwest market 
surrounding its mushroom plant in Salem, Oregon; and 
(iii) the Central Rocky Mountain States market sur- 
rounding its mushroom plant in Fillmore, Utah. United 
Foods sells no mushrooms east of Denver. 

12. Each of the regional fresh mushroom markets is 
self-contained. In those markets where United Foods 
sells its product, the retail industry has been rapidly 
consolidating into a smaller number of larger grocery 
chains; and, therefore, the total number of United 
Foods’ customers within its mushroom markets has 
become smaller. 

13. Additionally, within each regional market, there 
are a relatively small number of competing producers. 
There are two or three principal producers in each of 
the markets where United Foods sells its product. 

14. Fresh mushrooms are highly differentiated; they 
are not a homogenous product. There are different 
varieties of fresh mushrooms. Mushrooms of any par- 
ticular variety will come in different sizes. Mushrooms 
from different producers vary according to freshness, 
color, texture, and other qualities important to retailers 
and consumers. Growing mushrooms is as much art as 

201 

science, and the nature and quality of mushrooms can 
be identified to the producer. Producers further 
differentiate and identify their product through brand 
names and different kinds and styles of packaging. 
Producers also differentiate themselves in the market- 
place by the kinds and levels of service they provide 
their customers in connection with such matters as the 
delivery and marketing of their fresh mushrooms. 

15. Because of the regional nature of the industry, 
fresh mushroom producers do not independently en- 
gage in nationwide marketing activities. United Foods, 
like other fresh mushroom producers, engages in 
independent marketing activities, at its own expense, 
that are tailored to each of its regional markets and the 
stores within each market. United Foods’ marketing 
activities include in-store demonstrations, in-cabinet 
storage containers, specials, and advertising programs 
that are part of an individual store’s advertising 
programs. 

16. United Foods sells its mushrooms under its 
tradename “Pictsweet.” United Foods’ marketing 
activities are designed to promote the distinguishing 
qualities of its mushroom products and therefore to 
differentiate its mushroom products and services in the 
marketplace. 

17. The Mushroom Council engages in “generic” 
promotional and advertising programs for fresh mush- 
rooms. These generic programs talk about mushrooms 
generally and do not attempt to describe the differences 
among the various mushroom products that are sold in 
the marketplace. The Mushroom Council programs, 
consequently, portray mushrooms generally as an 
undifferentiated product. The Mushroom Council’s 

202 

activities are national in scope, and the Mushroom 
Council therefore spends money to promote mushrooms 
in markets outside of United Foods’ markets. A generic 
advertising or promotional program that may have a 
positive effect in one regional market or among one 
group of consumers may have a negative effect in 
another market or among other group of consumers. 

18. Attached hereto as Exhibit A is the Manage- 
ment Report for 1997 issued by the Mushroom Council. 
This Report briefly describes the generic promotional 
and advertising efforts of the Mushroom Council, and it 
includes the Mushroom Council’s most recent financial 
statement. 

19. In order for a nationwide generic promotional or 
advertising program for any kind of product to be 
effective, several conditions must be present: (i) the 
product must be relatively homogenous; (ii) there must 
be a relatively large number of producers in each mar- 
ket or submarket competing against each other, which 
would make it difficult for individual producers to 
differentiate or distinguish their product in the market- 
place; and (iii) the supply curve for the product must be 
relatively inelastic. Generic promotional or advertising 
programs also are more likely to succeed where the 
market is national in scope and where there is rela- 
tively little variation in the demand for the product 
among different population groups within the market. 
Additionally, a generic promotional or advertising pro- 
gram is more likely to be effective in a regulated 
industry where the generic advertising can compensate 
for the restrictions on competition that arise from the 
regulated nature of the industry. 

203 

20. These conditions are not present in the mush- 
room industry. For that reason, generic promotional 
and advertising programs cannot be effective in the 
mushroom industry. 

21. As a matter of fact, the generic promotional and 
advertising programs developed by the Mushroom 
Council have had no discernible effect on the different 
fresh mushroom markets where United Foods conducts 
its mushroom business; and to the best of our knowl- 
edge, these programs have had no discernible effect on 
any of the other fresh mushroom markets in the United 
States. There are several reasons for this. First, as 
noted above, the conditions for an effective generic 
advertising program are not present in the fresh 
mushroom industry. Second, the funds generated 
through assessments are inadequate to promote fresh 
mushrooms on a nationwide scale. As reflected in 
Exhibit A, in 1997 the Mushroom Council’s total expen- 
ditures were $2,307,506, and of that amount only 
$1,094,658 was spent on “promotion programs.” Any 
nationwide program, to be effective, would cost tens of 
millions of dollars or more. Third, the Mushroom 
Council programs cannot assist producers like United 
Foods in differentiating their products or in providing 
better quality of product and service to customers, 
which is necessary to any successful marketing pro- 
gram. And, finally, the Mushroom Council programs, 
by definition, cannot regulate the regional markets or 
fresh mushrooms. 

22. To the extent that any of the Mushroom Council 
programs may be effective in increasing overall demand 
for fresh mushrooms, it is reasonably likely that the 
benefit from any such increase in demand would be 

204 

realized primarily by producers other than United 
Foods who sell into the processed mushroom market 
and the market of last resort. Based on what has 
happened historically in the industry, if there were a 
general increase in the demand for fresh mushrooms, it 
can be reasonably expected that the producers who sell 
into the processed mushroom market and the market of 
last resort would divert their sales to the fresh 
mushroom market. This would have the likely effect of 
suppressing price increases in the fresh mushroom 
markets and of decreasing the supply in the processed 
mushroom markets, which in turn would increase the 
prices for mushrooms sold into the processed 
mushroom markets. The producers who sell in the 
processed mushroom markets, therefore, would realize 
the benefit from a general increase in demand for fresh 
mushrooms even though they are not being assessed for 
the costs of the generic marketing programs for the 
fresh mushroom market. 

23. Most importantly, the Mushroom Council’s ge- 
neric promotional and advertising programs send a 
message to United Foods’ current and prospective 
customers which tends to undermine the advertising 
and promotional activities of United Foods. The 
Mushroom Council’s programs portray fresh mush- 
rooms as a homogenous product, which is not true. By 
portraying fresh mushrooms in this manner, the Mush- 
room Council delivers a message which is contrary to 
the message United Foods is attempting to deliver to 
its customers. 

24. United Foods, in its marketing programs, 
attempts to portray its fresh mushrooms, and the 
services which it provides to its customers, as unique, 

205 

which they are. United Foods attempts to dissuade 
customers from viewing mushrooms as a generic, 
homogenous product. This is an essential part of 
United Foods’ marketing and advertising activities. 
Certain of United Foods’ competitors cannot compete 
with the quality of United Foods’ mushroom products 
and services. It would be in the interests of those 
producers to promote mushrooms as a homogenous pro- 
duct in an effort to diminish the competitive advantage 
that United Foods otherwise enjoys in the marketplace. 
The content of the Mushroom Council’s programs, 
therefore, potentially serves the interests of United 
Foods’ competitors, contrary United Foods’ interests. 
United Foods does not agree with the message of the 
Mushroom Council, therefore, because the Mushroom 
Council’s message conflicts with United Foods’ 
fundamental business strategy. 

FURTHER THE AFFIANT SAITH NOT. 

/s/ DONALD DRESSER 

DONALD DRESSER 

Sworn to and subscribed before me, 

BARBARA H. (illegible) 

a Notary Public, 

this the 7th day of July, 1998. 

My commission expires: April 2, 2001 

206 

EXHIBIT A 

[Seal Omitted] 

Annual Report 
1997 

[Seal Omitted] MUSHROOM 

COUNCIL 

2200-B Douglas Blvd., Suite #220, Roseville, California 95661 

207 

Management Report 

1997 was arguably the most exciting year for the 
Mushroom Council since its inception. However, the 
ratification of the Order in March of this year was even 
more exciting as well very gratifying. The overwhelm- 
ing response of the industry in the referendum clearly 
is an indication that the Council should continue on the 
course it set, and with renewed vigor. Significant 
actions taken by the Council in 1997 include: 

• The development of a new strategy by KDS 
Marketing based on their evaluation of the 
overall program and consumer research, 
resulting in the “Perfect Partner” slogan and 
logo. This theme will be carried-out in a more 
focused approach to promotion and will tie all 
facets of the program together. 

• A TV ad campaign was put in place with three 
flights during the year on various cable 
networks. The results indicate that the ads 
raised consumer awareness of our product and 
reinforced the theme that mushrooms are the 
perfect partner. 

• Continuation of ongoing programs are in the 
areas of consumer public relations, retail trade 
promotion and foodservice promotion. Again, 
in all three areas the new theme was incorpo- 
rated into all the promotion materials and 
messages. 

• The Pennsylvania Department of Agriculture 
again partnered with the Council and contri- 
buted a grant in the amount of $100,000. This 

208 

significantly strengthened the foodservice 
program and allowed for much broader cover- 
age. 

• The Strategic Plan was reviewed and modified 
during the year in light of the ajustments to 
the direction of the program. The plan has 
served the Council well as a guide, as well as, 
a measure of progress. 

• Compliance audits were carried out on a ran- 
dom basis on both fresh producers, first han- 
dlers and exempt producers. The results 
indicate that overall compliance is generally 
good. These audits will continue to insure that 
those required to pay assessments, in fact, do 
comply with the Order. 

• Assessments were collected on 542,650,000 
pounds of domestically-produced fresh mush- 
rooms and 15,448,444 pounds of fresh imports 
during the year. Overall this represents an 
increase over 1996 of 37,350,000 pounds, and 

7.4%. 

• The annual audit of the Mushroom Council 
resulted in the unqualified opinion of the 
auditors that the books and records are in 
good order, and that the financial statements 
fairly present the financial results of the 
operations. A copy of the audit report, detail- 
ing Mushroom Council activities, is included 
with this report. 

209 

Please feel free to contact the Mushroom Council office 
or any Council member should you require additional 
information or have any questions. 

Thank you, and we look forward to renewed prosperity 
in the mushroom industry. 

/s/ EDWARD A. LEO 
/s/ WADE WHITFIELD 

EDWARD A. LEO, 

WADE WHITFIELD, 

Chairperson President and CEO 

210 

1997 Promotion and Research Program 

211 

Consumer Publicity Program 

The 1997 consumer publicity program was designed to 
support and expand the reach of the Mushroom 
Council’s product image—“Fresh Mushrooms Make the 
Perfect Meal Companion” and educate consumers on 
the many ways to use and prepare fresh mushrooms. 
In all phases of the 1997 program—media placements, 
publicity events, collateral material—the “Perfect Part- 
ner” slogan/logo was incorporated. 

During the year, five press releases supporting the 
“Perfect Partner” theme were distributed to 850 food- 
editors nationwide. The basic mailings included copy, 
recipes, color and Black and White photography. In 
addition, food editors also received a special memo 
describing the consumer research that led to the 
development of the “Perfect Partner” theme, an offer to 
send readers the menu planner leaflet, a copy of the 
official mushroom month proclamation and mushroom 
cultivation information. Also, in support of the “Perfect 
Partner” theme six placements were made with syndi- 
cated food writers whose columns are published in 
thousands of metro newspapers, as well as, two ready- 
to-print press releases with recipes and photos that ran 
in thousands of daily and weekly newspapers through- 
out the year. 

A total of eight placements were made in food and 
consumer magazines in 1997. These included two full- 
color feature stories: one in WOMAN’S DAY “Meals in 
Minutes”; and the other in HOME magazine featuring 
mushroom recipes by Sacramento restaurateur Biba 
Caggiano. 

212 

Total potential readership for all editorial print 
placements including magazine readership was close to 
170 million with an advertising cost equivalent of about 
$2 million if the space had been purchased for 
advertising. 

Fourteen placements were made on National and 
Regional TV in 1997, most of them during National 
Mushroom Month in September. The NBC Today 
Show weatherman Willard Scott marked National 
Mushroom Month with a beautiful display of white 
mushrooms and an urging to “forage” in the super- 
market. Regional TV Greengrocers Johnny Lerro, 
Michael Marks and Eric Sorensen also marked 

National Mushroom Month with spots that focused 
exclusively on white mushrooms. TV food chef “Mr. 
Food” showcased mushrooms on three of his nationally 
syndicated cooking vignettes. Noted cookbook author/ 
TV chef Nathalie Dupree served as spokesperson for 
the Mushroom Council in Atlanta, as did food historian/ 
author Betty Fussell on the TV FOOD NETWORK. The 

HOME & GARDEN CHANNEL’S “All in Good Taste” 
devoted its 1/2 hour segment to mushrooms using 
information, recipe ideas and video footage supplied by 
the Mushroom Council. Burt Wolfe’s “A Taste for 
Travel” in which fresh mushrooms were featured 
appeared three times on the TRAVEL CHANNEL 

during the year. Estimated potential viewership for all 
National and Regional TV placements was 68 million 
with an advertising cost equivalent of $1 million if the 
commercial airtime had been purchased. 

213 

Two recipe video releases were produced in 1997 and 
distributed to 125 TV Cable and broadcast stations to 
coincide with the first flight of the “game show” TV 
commercial. These two-minute cooking demos sup- 
ported the “Perfect Partner” image with the logo 
appearing on the opening screen. Potential viewership 
is estimated at 23 million based on bounce-back cards 
and follow-up phone calls. 

In addition to TV, a radio media tour was conducted 
during National Mushroom Month. Renowned food 
authority/writer John Willoughby served as mushroom 
spokesperson on radio talk show interviews nationwide. 
He was heard on 60 stations, many in major markets 
including Los Angeles, New York and Boston. 

National Mushroom Month placements were made on 
four major web sites on the internet in 1997 The AOL 
Cooking Club, Electronic Gourmet Guide, MSN’s 
Cooking Forum and Mimi’s Cyberkitchen. All place- 
ments consisted of multiple screens of mushroom 
information and recipes graphically incorporating the 
“Perfect Partner” logo. 

Two programs in 1997 were targeted to the food 
professionals: the Mushroom Practicum in New York 
City, and the Mushroom Memo newsletter. 

The Practicum was a discussion/demonstration and 
tasting focusing on white mushrooms led by John 
Willoughby and his co-author chef, Chris Schlesinger. It 
was held at Peter Kump’s Cooking School and attended 
by 50 food editors from such publications as GOOD 
HOUSEKEEPING, REDBOOK and FOOD & WINE, 
as well as, freelance and syndicated food writers. 
Feedback was positive with comments such as the one 

214 

from an editor at GOOD HOUSEKEEPING—“The 
information will find its way onto our magazine food 
pages.” 

During 1997, three issues of the Mushroom Memo 

newsletter, designed to keep fresh mushrooms top-of- 
mind, were distributed to approximately 1,000 food 
communicators. 

Foodservice Promotional Program 

The major objective of the ongoing foodservice pro- 
gram throughout 1997 was to increase fresh mushroom 
demand at both the distributor and operator levels. 
The target audience continued to be: 

- Mid-scale Chain Operations 

- White Tablecloth Independents 

- Selected Contract Feeders 

- Distributor Sales Representatives 

The program elements included: 

- Test Market Case Studies 

- Collateral Material Development 

- Ongoing Communications 

Newsletter 
Mushroom Council Web Page 

- Trade Shows 

- Trade Advertising 

- Foodservice Public Relations 

215 

Four case studies were conducted in 1997. The purpose 
of the studies were to develop operator testimonials as 
to the profitability of fresh mushrooms. Sizzler, Inc. 
with 261 units participated in a national promotion 
during the fall quarter. The goal of the promotion was 
to increase ticket totals. A Top Your Steak promotion 
in which Burgundy Mushrooms were offered as an 
upsell on all steak orders resulted in permanent place- 
ment of the Burgundy Mushrooms on the menu. A 
second promotion was conducted with Garfield’s Resta- 
urants, a mall-based Southern and Midwest Region 
midscale chain. A Mushroom Stuffed Steak was offered 
that was higher in price than regular menu items. Tic- 
ket averages increased with many regular customers 
buying the Mushroom Stuffed Steak. The chain 
continued to use fresh white mushrooms to upsell ticket 
totals. The test included all 48 Garfield’s units. 

Flik International, a contract feeder servicing mainly 
B&I clients on the East Coast conducted a November 
promotion using fresh white mushrooms. A direct 
quote from one of the participating units stated, 
“Interest and enthusiasm sparked by the use of fresh 
mushrooms far surpassed our expectations. We used 
them across the menu—grill line, hot food line, salad 
bar and take out service.” 

The Cadillac Ranch in Denver, Colorado conducted a 

Mushroom Madness promotion featuring special appe- 
tizers. The independent restaurant has made their 
mushroom appetizers a permanent menu item due to a 
10 percent increase in customer sales. 

New collateral material added to the Mushroom Council 
resource kit. Several new pieces included the Proof Is 
In the Profits fact sheet series, the Cost-per-Serving 

216 

Breakdown reference piece and a training video 
handout as an accompaniment to the existing food- 
service video. 

Ongoing distributor education included the quarterly 
foodservice newsletter renamed “Shedding Light on 
Fresh Mushrooms”. The publication was distributed to 
1,000+ distributor representatives quarterly. 

Trade shows included: the Pizza Expo, National Res- 
taurant Association Show and the PMA Foodservice 
Conference. 

Foodservice advertising focused on case studies con- 
ducted in 1996. A full-page ad based on the Harris 
Ranch case study was placed in RESTAURANT BUSI- 
NESS, FOODSERVICE NEWSLETTER and PRODUCE SOLU- 
TIONS. 

Foodservice publicity placements were seen in nine 
publications including CHEF, CHEERS, COOKING FOR 
PROFIT, PIZZA TODAY, PRODUCE SOLUTIONS, RESTAU- 
RANT BUSINESS, RESTAURANT HOSPITALITY, FOOD 
MANAGEMENT and FOODSERVICE DIRECTOR maga- 
zines. 

217 

Mushroom Council/Pennsylvania Joint 
Promotion 

A joint promotion between the Mushroom Council and 
the Pennsylvania Fresh Promotion Committee was a 
part of the 1997 foodservice program. The Pennsylva- 
nia Department of Agriculture provided a $100,000 
grant through the Pennsylvania Fresh Promotion Com- 
mittee which was matched by $220,000 of Council funds 
to expand the overall foodservice program to $320,000. 

The foodservice promotion category was evaluated as 
an area to benefit by the additional funds. 

Retail Trade Promotion Program 

A number of new sales support tools were tested and 
introduced in 1997. All of these new elements were 
created under the “Blueprint for Profit” banner. 

The trade promotion program has two principal areas of 
responsibility: keeping retailers focused on the profit 
potential represented by fresh mushrooms and remind- 
ing shoppers while in store, to add mushrooms to their 
purchases. 

To keep retailers focused on mushrooms, a number of 
sales support programs were developed on behalf of the 
industry. Two new full-page ads were developed to 
reinforce key selling points. The first offered a data 
disk that permitted users to determine the optimum 
balance between their price paid, price sold and the 
resulting gross margin. The disk includes data from an 
actual (but unidentified) chain so that the disk user can 
see how the data was entered and analyzed, as well as, 

218 

a template for them to use to confirm their own 
experience. 

The second ad reported the results of a test that was 
designed to determine the sales results from adding a 
second location of sliced mushrooms in the fresh-cut 
salad section. 

The test chain experienced just over a 10 
percent sales increase as a result of this new facing in a 
secondary location. 

The trade ads were supported by a series of press 
releases that went out through the year, as well as, by a 
semi-annual retailer newsletter that ran as an insert in 
Produce Merchandising. 

As new materials were developed, they were sent by 
direct mail to a list of nearly 400 V.P.-level produce 
buyers and merchandisers. An accompanying order 
form encouraged recipients to send for quantities of 
these free materials for in-store use. Two particularly 
popular tools were a slide rule to help determine 
mushroom profitability and a CD-ROM that contains all 
of the graphics needed to produce retail Best Food Day 
ads. 

The fresh mushroom story was presented at a number 
of industry gatherings. These events included sponsor- 
ship of an Eastern Produce Council dinner, Fresh 
Produce Council (Southern California) luncheon, and a 
New England Fresh Produce Council dinner meeting. 
In addition, we had a booth at PMA and Fresh Produce 
Retail Expo and attended the Annual Produce Con- 
ference and Mexican-American Grocers’ Convention. 

Our in-store shopper communication program continues 
to rely heavily on in-store radio. Every 15 minutes the 

219 

music in the store stops and shoppers are reminded 
that fresh mushrooms go with almost everything. The 
voice and copy strongly reinforce the cable television 
campaign “Perfect Partner” message, in an effort to 
build additional awareness for the positioning. Sales 
data was collected from a Southern California chain 
that consistently reports an average 10 percent month- 
to month increase in fresh mushroom sales. . . which 
they principally attribute to the in-store radio. 

The Council continues to gather fresh mushroom sales 
trend data from six cooperating retailers across the 
country. Inferences that can be drawn from these data 
will be compiled and shared with the industry during 
the 1998 year. 

To better conform to the new positioning for “Fresh 
mushrooms—The Perfect Partner” the retail trade 
program will change from “Blueprint for Profit” to 
“Partners in Profit.” This solidly supports the “Perfect 
Partner” theme. 

Council Web Site 

By the end of 1997, more than 15,000 visitors had ac- 
cessed the Council web-site. It contains product infor- 
mation, color and B & W line art, recipes and consumer 
information to help users find new ways to use fresh 
mushrooms. It also contains information for food- 
service users, educators, and the consumer press. The 
site location is www.mushroomcouncil.com. 

Consumer Image Promotion Program 

The major marketing research effort conducted by the 
Council in 1996 and 1997 resulted in our product 

220 

position, the foundation for all consumer promotion of 
fresh mushrooms. Consumers believe that fresh mush- 
rooms “make the perfect meal companion” and when 
reminded of this position in image advertising and 
public relations, are motivated to increase their con- 
sumption of our product. The 1997 Consumer Image 
Program was implemented to achieve this singular 
goal—increase consumer awareness that fresh mush- 
rooms are “The Perfect Partner” for almost anything. 

The cornerstone of the 1997 promotion was a television 
advertising campaign. Built on “The Perfect Partner” 
strategy and other research on creative impact, two 
versions of a TV commercial were produced in the first 
quarter. A “game show” design played off the success 
of “Family Feud” type programming and drove home 
the key product benefit of versatility. One, thirty- 
second (standard TV time) spot to establish the 
primary image was supplemented by a ten-second 
version to increase frequency and maximize the media 
budget. 

The total TV campaign consisted of three separate 
flights of advertising during the year, running on six 
national cable networks. Launched in the spring for a 
four-week period, the commercials were re-aired for 
two weeks to support summer sales and ran another 
four-week period during the fall. Over twenty-five 
percent (25%) of our total target audience of fifty-two 
million women saw our commercial over three times (on 
average) on TNT, TBS, DISCOVERY, LIFETIME, THE 
LEARNING CHANNEL and THE FOOD NETWORK. 

Another key element of the consumer promotion 
program was integration. Wherever and whenever a 
consumer saw or heard a fresh mushroom message, it 

221 

was based on “The Perfect Partner” image. Integration 
increases the impact and efficiency of the overall 
program. Supporting the television campaign, a meal 
planner was developed to help our consumers who more 
and more struggle with the decision over “What’s for 
dinner?”, make those decisions while shopping. Over a 
million brochures providing quick and easy recipes 
were delivered to retailers coordinated with the TV 
flights. In addition, three retail mailings were sent to 
key decision makers announcing the next wave of 
promotional support by the Council to encourage coor- 
dination of their in-store programs for fresh mush- 
rooms. Producers received each announcement to 
retailers and received a weekly schedule on the 
Council’s FAX Alert. 

The goal of the 1997 image promotion to increase con- 
sumer awareness of our product position was measured 
by an Advertising Tracking Study. This standard mar- 
keting research tool, employing a telephone question- 
naire methodology, was implemented prior to the 
spring launch of the program. Benchmark numbers 
were collected on a variety of parameters including 
usage and attitudes, as well as, general and specific 
awareness of our promotional message. The study was 
repeated in the fall after conclusion of our program. 
Final analysis showed a twenty-five percent (25%) 
increase in audience attitude and consumption of fresh 
mushrooms. “The Perfect Partner” image is helping 
achieve our industry goal to increase consumption of 
fresh mushrooms. 

Crisis Management 

The Council developed a comprehensive crisis manage- 
ment plan in early 1996. The purpose is to have a well 

222 

thought-out plan in place in case of any situation that 
might arise that would erode the confidence of con- 
sumers in fresh mushrooms that are consumed in the 
household or in eating establishments away from home. 

The plan includes a management team that would 
immediately swing into action. The team consists of 
Council management and appropriate experts in all 
fields related to a given crisis. Lists of retailers, whole- 
salers, foodservice distributors and operators, federal 
and state health organizations and others deemed 
appropriate to bring on to the team are maintained. 

The plan positions the Mushroom Council as the organi- 
zation to take the lead in situations effecting the 
industry. 

223 

1997 Council Members 

Ed Leo, Chairperson* ...................................... 

John C. Leo & Son 
Region 2 

Shah Kazemi, Vice-Chairperson** ................ 

Monterey Mushrooms, Inc. 

Region 3 

William K. Street, Treasurer ......................... 

Ostrom Mushroom Farms 
Region 3 

Virgil Jurgensmeyer, Secretary ................... 

J-M Farms 
Region 4 

James Angelucci ............................................... 

Phillips Mushrooms 
Region 2 

Roger Claypoole ............................................... 

Creekside Mushrooms, Ltd. 

Region 2 

Wihelm W. Meya .............................................. 

Franklin Mushrooms, Inc. 

Region 1 

Dr. Robert E. Miller*** ................................... 

Campbell’s Fresh, Inc. 

Region 1 

C. Douglas Tanner ........................................... 

Sunrise Mushrooms 
Region 3 

* Assumed Chairperson responsibilities on August 1, 1997. 

** Elected Vice-President-Chairperson on July 31, 1997. 

*** Resigned as Chairperson and Council member on July 31, 
1997. 

224 

Council Staff 

Wade A Whitfield; President 
Robyn Cuevas, Public Relations Director 
Lisa Champney, Office Manager 

NOTE-STATES BY REGION: 

REGION 1 - Maine, Vermont, New Hampshire, Massachusetts, 

Rhode Island, Connecticut, New York, Ohio, Kentucky, 

Indiana, Michigan, Wisconsin, Illinois, Missouri, Iowa, 

Nebraska, Kansas, Minnesota, North Dakota, South Dakota, 

Montana, Colorado, and Wyoming. 

REGION 2 - Pennsylvania, Delaware, New Jersey, the District 

of Columbia, West Virginia, Virginia, and Maryland. 

REGION 3 - Washington, Oregon, Idaho, Utah, Arizona, 

California, Nevada, Alaska, and Hawaii. 

REGION 4 - New Mexico, Texas, Oklahoma, Arkansas, 

Louisiana, Alabama, Mississippi, Georgia, Tennessee, North 

Carolina, South Carolina, Florida, Puerto Rico. 

225 

TENNEY AND COMPANY 

Certified Public Accountants 

INDEPENDENT AUDITORS’ REPORT 

We have audited the accompanying general purpose 
financial statements of the Mushroom Council, an 
instrumentality of the United States Department of 
Agriculture, as of December 31, 1997, as listed in the 
table of contents. These financial statements are the 
responsibility of the Mushroom Council’s management. 
Our responsibility is to express an opinion on these 
financial statements based on our audit. 

We conducted our audit in accordance with generally 
accepted auditing standards and Government Auditing 
Standards, issued by the Comptroller General of the 
United States. These standards require that we plan 
and perform the audit to obtain reasonable assurance 
about whether the financial statements are free of 
material misstatement. An audit includes examining, 
on a test basis, evidence supporting the amounts and 
disclosures in the financial statements. An audit also 
includes assessing the accounting principles used and 
significant estimates made by management, as well as 
evaluating the overall financial statement presenta- 
tions. We believe that our audit provides a reasonable 
basis for our opinion. 

In our opinion, the general purpose financial state- 
ments referred to above present fairly, in all material 
respects, the financial position of the Mushroom Council 
as of December 31, 1997 and the results of its opera- 

226 

tions for the year then ended in conformity with gener- 
ally accepted accounting principles. 

March 18, 1998 

Tenney and Company 

1130 Civic Center Blvd. Ste. C Yuba City, California 95993 

(530) 674-4211 Fax (530) 674-4215 

227 

MUSHROOM COUNCIL 

BALANCE SHEET 
AS OF DECEMBER 31, 1997 

General 
Fund 

General 
Fixed Assets 
Account 
Group 
December 
31, 1997 

ASSETS 
Cash $ 668,184 $ 

$ 688,184 

Accounts 
receivable 291,977 291,977 
Fixed assets ________ 28,185 28,185 

Total Assets $ 960,161 $ 28,185 
$ 988,346 

LIABILITIES AND FUND EQUITY 

Accounts 
payable $ 128,843 $ 
$ 128,843 

Deferred 
compensation 364 ________ 364 
Due to USDA 
(see Note 6) 73,990 ________ 73,990 
Total liabilities 203,197 ________ 203,197 

228 

Fund Equity: 

Investments 
in general 
fixed assets 28,185 28,185 
Reserve for 
encumbrance 18,521 18,521 
Fund Balance: 

Unreserved 738,443 _____ 738,443 

Total fund 
equity 756,964 28,185 785,149 

Total Liabilities 
and Fund 
Equity $ 960,161 $ 28,185 $ 988,346 

The notes to the financial statements are an integral part of this 

statement. 

See accompanying independent auditors’ report. 

229 

MUSHROOM COUNCIL 

COMBINED STATEMENT OF REVENUES, 
EXPENDITURES AND CHANGES IN FUND BALANCES 
FOR THE YEAR ENDED DECEMBER 31, 1997 

General 
_ Fund___ 
Revenues 

Assessments 

Domestic $ 2,483,902 
Imports 69,518 
Interest 10,013 
Product sales 25,654 
Miscellaneous 10,368 
Grants 100,000 

Total revenues 2,699,455 
Expenditures 

Conferences/conventions 12,670 
Industry program support 
12,250 

Office expense 68,709 
Other operating expense 
30,768 

Payroll costs including taxes 
155,474 

Promotions - staff cost 

96,442 

Professional services 
(including compliance audits) 
39,975 

Promotion programs 1,094,658 
Product, image development 
638,297 

Travel 44,719 
Government expenses (see Notes 6 & 7) 
57,871 

Crisis management 4,017 
Industry materials production 
15,405 

Program evaluations 36,251 

Total expenditures 2,307,506 

230 

Excess of revenues 
over (under) expenditures 
391,949 

Fund balance 
unreserved December 31, 1996 
349,015 

Fund balance 
unreserved – subtotal 
740,964 

Increase in reserve 
for encumbrances 
( 2,521) 

Fund Balance 

Unreserved December 31, 1997 

$ 738,443 

The notes to the financial statements are an integral part of this 

statement. 

See accompanying independent auditors’ report. 

231 

MUSHROOM COUNCIL 

COMBINED STATEMENT OF REVENUES, 
EXPENDITURES AND CHANGES IN FUND BALANCES 
- BUDGET AND ACTUAL FOR THE YEAR ENDED 

DECEMBER 31, 1997 

Variance 
Favorable 
Actual Budget (Unfavorable) 
Revenues 

Assessments 

Domestic $ 2,483,902 $ 2,300,000 

$ 183,902 

Imports 69,518 54,000 15,518 
Interest 10,013 10,000 13 
Product sales 25,654 25,000 654 
Miscellaneous 10,368 5,000 5,368 
Grants 100, 000 100,000 _____ 
Total revenues $ 2,699,455 $ 2,494,000 
$ 205,455 

Expenditures 

Conferences/ 
conventions 12,670 11,000 ( 1,670) 
Industry program 
support 12,250 12,550 300 
Office expense 68,709 70,700 1,991 
Other operating 
expense 30,768 34,300 3,532 
Payroll – including 
taxes 155,474 158,500 3,026 
Promotions – 
staff cost 96,442 114,400 17,958 
Professional 
services 39,975 51,000 11,025 
Promotion 
programs 1,094,658 1,077,000 ( 17,658) 

232 

Product image 
development 638,297 628,000 ( 10,297) 
Travel 44,719 52,000 7,281 
Government expenses 
(see Notes 6 & 7) 94,913 
151,657 56,744 

Crisis 
management 4,017 5,000 983 
Industry 
materials 
production 15,405 10,000 ( 5,405) 
Research 36,251 50,000 13,749 
Program evaluation 50,000 50,000 
Promotion/ 
contingency 
reserves 422,469 422,469 
Total 
expenditures 2,344,548 2,898,576 554,028 
Excess of 
revenues 
over (under) 
expenditures 354,907 ( 404,576) 759,483 
Add back USDA 
startup fee debt 
payments in 1997 
included above 
in Government 
Expenses 37,042 37,042 
Fund balance 
unreserved 
December 31, 
1996 349,015 349,015 ____ 

Fund balance 
unreserved - 
subtotal 740,964 ( 55,561) 796,525 

233 

Increase in 
reserve for 
encumbrances ( 2,521) 
( 2,521) 

Fund Balance Unreserved 

December 31, 
1997 $ 783,443 ($ 55,561) $ 794,004 

The notes to the financial statements are as integral part of this 

statement. 

SEE ACCOMPANYING INDEPENDENT AUDITORS’ 

REPORT. 

234 

MUSHROOM COUNCIL 

NOTES TO THE FINANCIAL STATEMENTS 
DECEMBER 31, 1997 

The accounting methods and procedures adopted by 
the Mushroom Council conform to generally 
accepted accounting principles as applied to 
governmental entities. The following notes to the 
financial statements are an integral part of the 
Mushroom Council’s General Purpose Financial 
Statements. 

1. Summary of Significant Accounting Policies 

Financial Reporting Entity 

The Mushroom Council is authorized by the 
Mushroom Promotion, Research, and Consumer 
Information Act of 1990 (P.L. 101-624). The Council 
is considered an instrumentality of the U.S. Depart- 
ment of Agriculture which conducts the admini- 
strative oversight of its activities. 

The Council commenced activity in August of 1993. 
The Council is funded by assessments collected from 
producers and importers who produce or import, on 
average, over 500,000 pounds of mushrooms 
annually that are marketed or imported for fresh 
use. The Council was formed for the purpose of 
mushroom promotion, research and to provide 
consumer information. The Council is governed by a 
board appointed by the Secretary of Agriculture. 
The board consists of at least four members, but not 
more than nine. 

235 

Basis of presentation—fund accounting. The 
accounts of the Mushroom Council are organized on 
the basis of funds and account groups, each of which 
is considered a separate accounting entity. The 
Council has a General Fund and a Fixed Asset 
Account Group. Each fund is accounted for by a 
separate set of self-balancing accounts that comprise 
its assets, liabilities, fund balance, revenues, and 
expenditures/expenses. Individual funds account 
for the governmental resources allocated to them 
for the purpose of carrying on specific activities in 
accordance with laws, regulations, or other 
restrictions. 

General Fund: This fund is established to account 
for resources devoted to financing the general 
services of the Council. General assessments and 
other sources of revenue used to finance the funda- 
mental operations of the Council are included in this 
fund. The fund is charged with all costs of operating 
the government entity for which a separate fund has 
not been established. 

General Fixed Assets Account Group: This is not a 
fund but rather an account group that is used to 
account for general fixed assets acquired principally 
for general purposes and excludes fixed assets in 
any Enterprise Funds or Internal Service Funds. 

Basis of accounting Governmental funds use the 
modified accrual basis of accounting. Under this 
method, revenues are recognized in the accounting 
period in which they become both available and 
measurable (flow of current financial resources mea- 
surement focus). Miscellaneous revenues are re- 

236 

corded as revenues when received in cash. Assess- 
ments and investment earnings are recorded when 
earned (when they are measurable and available). 
Expenditures are recognized in the accounting 
period in which the fund liability is incurred, if mea- 
surable. 

Budgets and the budgetary process. The Council 
adopts an annual operating budget, which can be 
amended by the Council, with USDA approval, 
throughout the year. Formal budgetary accounting 
is employed as a management control for all funds of 
the Council. For each of the funds for which a 
formal budget is adopted, the same basis of account- 
ing is used to reflect actual revenues and expendi- 
tures recognized on the basis of generally accepted 
accounting principles. 

Receivables. All receivables are reported at their 
gross value and, where appropriate, are reduced by 
the estimated portion that is expected to be uncol- 
lectible. 

Property, plant, and equipment. Fixed assets used 
in governmental fund type operations are accounted 
for in the General Fixed Assets Account Group. 
Public domain (infrastructure) general fixed assets 
consisting of certain improvements other than 
buildings, such as roads, sidewalks, and bridges, are 
not capitalized. Property, plant, and equipment 
acquired or constructed for general governmental 
operations is recorded as an expenditure in the fund 
making the expenditure and capitalized at cost in 
the General Fixed Assets Account Group. 

237 

Fund Equity. The unreserved fund balances for 
governmental funds represent the amount available 
for budgeting future operations. The reserved fund 
balances for governmental funds represent the 
amount that has been legally identified for specific 
purposes. Unreserved retained earnings for pro- 
prietary funds represent the net assets available for 
future operations or distribution. Reserved retained 
earnings for proprietary funds represent the net 
assets that have been legally identified for specific 
purposes. 

The reserve for encumbrances was created to repre- 
sent encumbrances outstanding at the end of the 
year based on purchase orders and contracts signed 
by the Council but not completed as of the close of 
the fiscal year. 

Revenues and expenditures/expenses. Revenues 
for governmental funds are recorded when they are 
determined to be both measurable and available. 
Generally, tax revenues, fees, and nontax revenues 
are recognized when received. Grants from other 
governments are recognized when qualifying ex- 
penditures are incurred. Expenditures for govern- 
mental funds are recorded when the related liability 
is incurred. 

2. Cash 

At December 31, 1997, the Council had deposited 
with Bank of America: 

Checking Account $ 12,058 

238 

Savings 656,126 

Total $ 668,184 

All bank deposits as of the balance sheet date are 
insured or collateralized with securities held by the 
Council’s agent and approved by the USDA. 

3. Accounts Receivable 

At December 31, 1997 receivables consisted of as- 
sessments primarily for December’s sales of mush- 
rooms by handlers. All the receivables were 
subsequently collected in January and February of 
1998. 

4. Property, Plant and Equipment 

Balance Balance 
12/31/96 Additions Deletions 12/31/97 

Equipment $ 28,185 $____ $____ 28,185 

5. Operating Lease 

The Council is obligated under certain leases 
accounted for as operating leases. Operating 
leases do not give rise to property rights or lease 
obligations, and therefore, the results of the lease 
agreements are not reflected in the Council’s 
account groups. The following is a schedule of 
future minimum rental payments required under 
operating leases that have initial or remaining 
noncancelable lease terms in excess of one year as 
of December 31, 1997: 

239 

Pitney Bowes Office 
Postage Meter Building 

1998 $ 586 
$ 31,416 

1999 -0- 10,576 
2000 -0- -0- 
2001 __ -0- 
__- 0-__ 

Total Remaining 

$ - 0- 

$ -0-__ 

6. Due to USDA 

The USDA incurred initial start up costs during 
1991 through 1993 totaling $277,717 to create the 
Mushroom Council. The Council has arranged 
with the USDA to pay these costs back over a 
sixty month period. At the balance sheet date, 
$73,990 remained to be paid as follows: 

Minimum 
Payments 

1998 $73,990 

Total Remaining 
$ - 0 - 

7. Government Expenses 

AMS User Fees: 

Paid as of 12/31/97 
$ 50,245 

US Customs General Counsel User Fees 

Paid as of 12/31/97 
618 

Total Expenses For 1997 50,863 

240 

AMS User Fees: 

Paid in 1997 for 1996 

7,008 

57,871 

Government Implementation Repay: 
Paid in 1997 

37,042 

94,913 

Compliance auditing services paid 
in 1997 - included in professional 
services 31,000 

Costs Paid During 1997 
$ 125,913 

For budget purposes, government implementa- 
tion funds to be repaid in a year are included in 
the budget. Therefore, for the comparison of 
budget and actual cost, actual government imple- 
mentation funds (Due to USDA) are included in 
expenses and adjusted in the fund balance section 
of page 4. 

8. Encumbered Funds 

Due to USDA - 1997 - Paid in 1998 
$ 18,521 

Mushroom Council makes the requisite payments 
to USDA as they are billed by USDA. Four pay- 
ments for 1997 totaling $18,521 were billed to the 
Council after December 31, 1997. 

9. Subsequent Events 

Two producer-handlers have filed administrative 
adjudicatory actions under 7 U.S.C. 6106 chal- 
lenging the whole program on constitutional 

241 

grounds. Subsequently, the U.S. Supreme Court 
has ruled in favor of the Mushroom Council law. 
However, the specific actions noted herein are in 
the process of working their way through the 
appeals process. The accounts receivable on Page 
2 of this report do not include amounts due from 
the two parties who have challenged the consti- 
tutionality of the Mushroom Council.