Tuesday, March 18, 2008
Organic Milk Producer Subject to Mandated Price Structure—C.A.
By SHERRI M. OKAMOTO, Staff Writer
A dairy firm that produces all the milk it processes in its processing plant from its own herd is not exempt from the regulated price structure for milk purchasing, the Fifth District Court of Appeal held yesterday.
Affirming a Fresno Superior Court decision, the appeals court held that under California law, all milk packaged or processed by a processing firm must be included in a statutorily mandated pricing “pool” to ensure that all milk producers receive an adequate return on their products, even if the processor and producer of the milk is the same entity.
Organic Pastures Dairy Company L.L.C. owns a dairy farm that produces raw milk for sale to processing firms, and also processes fluid milk and dairy products for sale to retailers and consumers. All of the milk that it processes comes from its own dairy herd, and all of its products are certified organic and are raw or unpasteurized.
Pursuant to its authority under the California Milk Stabilization and Marketing Act, the California Department of Food and Agriculture established minimum prices that certain milk processors, or “handlers,” must pay milk producers for milk, based upon the final product into which the milk is made.
The act defines a handler as any entity that “receives, purchases, or otherwise acquires … market milk in unprocessed or bulk form from a producer, a producer-handler, or another handler for the purpose of manufacture, processing, sale, or other handling.”
Under the Gonsolves Milk Pooling Act, handlers who make products that have a lower regulated price must also make additional payments into a pool, while handlers who make products that have a higher regulated price are entitled to a refund from the pool.
The department determined that that Organic Pastures owed an obligation to the pool, as well as various fees and assessments. After Organic Pastures failed to pay, the department filed suit.
Organic Pastures argued that it was not a handler because it produced all of the milk it processed and because of the special constraints under which firms that produce and process organic, unpasteurized milk and milk products operate.
During his oral announcement of his tentative decision, Judge Mark W. Snauffer said, “[I]t seems to me, a small producer of raw milk shouldn’t necessarily be a part of all of this, but the way these statutes and regulations are written, I can’t see any way that they are not a part of it.”
The trial court later found that there was no requirement that a processor receive milk from another entity in order to be a “handler” and subject to the statutory pooling requirements. It also held that the applicable statutes apply to all market milk without differentiating between raw, organic milk and pasteurized milk.
Organic Pastures appealed.
“Just as one can give oneself a break or a pat on the back, one can also receive them from oneself,” Justice Rebecca A. Wiseman wrote on behalf of the court, “Expressions like these are not inconsistent with the usual meaning of the word [receive].”
She continued, “The Legislature made clear its intent generally to include firms that process self-produced milk in the pooling scheme by setting up a series of exceptions for narrowly defined classes of these firms.”
Because there would be no need for exceptions for some producer-handler entities unless the Legislature meant to include these types of firms in the pooling process, she reasoned, it must have intended to include them in the pool, and in its definition of the term “handler.”
As none of the exceptions applied to Organic Pastures, the court ruled that the dairy was obligated to participate in the pool as a handler, and the fees and assessments related to its pooling obligations were properly imposed.
In concluding, she wrote “ we are sympathetic to Organic Pastures’s view that, because of the nature of its products, it might reasonably be given regulatory treatment different from that given to other dairy firms,” but she noted, “Whether an exception should exist is a question for the Legislature.”
Steve Lyle, spokesman for the Department of Food and Agriculture, said, “We have long held that Organic Pastures should be treated like everybody else with respect to the milk pooling arrangements in California.”
Mark McAfee, founder of Organic Pastures, said his company was “moving aggressively to overturn this [decision].”
“The judiciary doesn’t have the guts to move against the Legislature … [so] we got a lobbyist and are involved in the political process. I think we’ll appeal, but I believe the political process will probably be the resolution of this.”
McAfee said no raw milk producers have ever contributed to the pool, and following the passage of Assembly Bill 1735 while this appeal was pending, it is “technically impossible” to buy milk from the pool and still meet the safety standards required for raw milk. The passage of AB1735 is a “huge change” he continued, and “will help the legislative movement go forward.”
He said there is a hearing scheduled for April 15 in Sacramento, chaired by Sen. Dean Florez, D-Fresno, to address proposed legislation involving the milk pool and raw milk producers.
Organic Pastures’ counsel could not be reached for comment.
Justices Brad R. Hill and Betty L. Dawson joined Wiseman in her opinion.
The case is Kawamura v. Organic Pastures Dairy Company L.L.C., F051733.
Copyright 2008, Metropolitan News Company