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Quota News This Week

This past Tuesday Judge Timothy Aspinwall, the judge from the Office of Administrative Hearings who conducted the hearing on the STOP QIP petition, which sought a referendum to suspend Chapter 3.5, submitted his recommendation to Secretary Ross. For Judge Aspinwall it came down to the phrase in Section 62757 (c) “shall be pursuant to”.

The Judge says: “For this, it is essential to understand the meaning of the verb “be”. The definition of the substantive verb “be” includes means “to exist,” “to happen or occur,” and “to remain or continue.” (Webster’s New World Dict. (2d College ed. 1976) p. 121.) Based on this definition, section 62757, subdivision (c), is best understood to proscribe the two-step process by which the QIP was brought into existence, and by which it will be permitted to remain or continue. Thus, any effort to suspend, amend, or terminate the QIP must adhere to the two-step process outlined in Sections 62719, 62716 and 62717, as incorporated by section 62757, subdivision (c).

The STOP QIP petition was based on its belief that a referendum to suspend Chapter 3.5 would also suspend section 62757, which is in Chapter 3.5, and authorizes CDFA to collect an assessment to fund the quota payments. Chapter 3.5 has its own lower vote threshold. The Judge obviously read the law a different way. As for all the testimony by producers and experts on all sides about the costs and benefits of the quota program, the Judge wrote that “This evidence, though important and compelling, did not factor into this decision which is based primarily on statutory requirements for a referendum.” His order is brief. “Petitioner’s request for a referendum pursuant to Chapter 3.5 is DENIED.

What Judge Aspinwall was tasked to do was conduct a hearing to develop a recommendation for Secretary Karen Ross who must make the final decision. She has not announced what she will do and has 30 days to make that decision.

On Friday, July 31 there was a virtual hearing in Department 17 of the Sacramento Superior Court. This hearing was to listen to oral arguments in the case that STOP QIP brought challenging the process that CDFA used to create the QIP in the first place. This case also involves the interpretation of the words contained in Section 62757 of the Food and Agriculture Code. The Legislature passed this language in 2017 for the purpose of authorizing the establishment of a stand-alone quota program if California became a FMMO. Superior Court Judge James P. Arguelles had released a Partial Tentative Ruling on Thursday in which he signaled that he disagreed with the Petitioner’s [STOP QIP] position. The Judge wrote out two questions for the lawyers for all the various parties to address at the hearing. In addition to the STOP QIP lawyers, there were lawyers for CDFA, for SAVE QIP (large quota holders) and for the United Dairy Families as well as Farmdale Creamery which had a related case up for decision participating in the video hearing. The lawyers and the Judge went back and forth only really agreeing that Section 62757 (a) as written by the Legislature was “not the model of clarity” but disagreeing as to the implications of that on what CDFA actually did to carry out the intent of the law which was to establish a stand-alone quota program in the event that California became a FMMO. The Judge gave everyone ample opportunity to make their points and closed the hearing without rendering a decision.

He said he would put something out within the next few weeks. Meanwhile, on Friday July 24, CDFA informed the United Dairy Families (UDFC) that they had verified sufficient signatures on the UDFC petition which requests a referendum on the UDFC proposal. As you may recall, that proposal is to change the Regional Quota Adjusters to equalize the quota differential at $1.43 per cwt. statewide immediately and then run the QIP until March 1, 2025 at which time the QIP would terminate. CDFA’s letter said they anticipated scheduling an August Producer Review Board meeting followed by a public hearing to consider the petition.

Geoff Vanden Heuvel

Director of Regulatory and Economic Affairs

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