CA: Stop QIP Lawsuit Explained

At the quota meeting held Feb. 11 at World Ag Expo in Tulare, Anja Raudabaugh, CEO of Western United Dairies (WUD), provided this explanation of the Stop QIP lawsuit and petitions

The Court has scheduled a hearing on the STOP QIP lawsuit against CDFA for May 15, 2020 at 10:00 a.m. This is a hearing on the merits of STOP QIP’s request for an order declaring the QIP invalid. At the hearing, and in written briefs to the Court in the weeks before the hearing, STOP QIP and CDFA will present their respective arguments on the validity of the QIP. The parties may also submit evidence of any relevant facts to support their respective positions. STOP QIP’s notice of the hearing indicates that they do not currently intend to present any witnesses at the hearing.

Because the lawsuit focuses on a legal issue – that is, what procedural steps were required by the applicable statutes and regulations when CDFA adopted the QIP – the Court could decide the issue based on the briefs and oral argument at the hearing. United Dairy Families of California (UDFC) and WUD intend to support the Department in defending this lawsuit, and we plan to do so by submitting an amicus curia (which translates to friend of the court) brief before the hearing. We will keep you updated on any developments.

As you may know, STOP QIP recently submitted yet another petition to CDFA seeking to terminate the QIP. In this petition, STOP QIP asks CDFA to immediately suspend Chapter 3.5 of the Gonsalves Milk Pooling Act. STOP QIP also asserts that suspension of Chapter 3.5 will cause the QIP to be terminated because the QIP was “established purportedly pursuant to Chapter 3.5.” To our knowledge, this is the first time a Chapter 3.5 petition has been submitted to the Secretary.

What is Chapter 3.5? Chapter 3.5 came into effect on January 1, 1994 and established the “fixed differential” for quota payments (subject to RQAs). This reflected a change from the prior method of calculating quota payments, which resulted in the quota differential fluctuating from month to month. There were no changes to Chapter 3.5 until June 2017 when a new section (62757) was added to expressly authorize CDFA to establish a standalone quota program (the QIP) in the event producers voted in favor of a California FMMO.

What’s the basic purpose of a Chapter 3.5 petition? According to the Code, producers can petition to suspend Chapter 3.5. When Chapter 3.5 was enacted in 1994, it was enacted by the Legislature, and not via producer referendum. So the Legislature included a process to put the continuation of the Chapter to a referendum, to give producers a way out of the new fixed differential. The referendum requirements are lower than those in other Chapters of the Gonsalves Milk Pooling Act. According to the Code, Chapter

3.5 will remain in place if at least 51% of producers vote and at least 51% of those voting and producing at least 51% of the state’s milk vote to keep Chapter 3.5 in place. In other words, if 49.1% of producers either do not vote, or vote no in such a referendum, then Chapter 3.5 will be suspended.

Why are the Chapter 3.5 referendum requirements important? The threshold referendum requirements for suspending Chapter 3.5 are lower than the requirements in Chapter 3 for terminating a plan that was voted into existence via referendum (like the QIP). In contrast, the Chapter 3 referendum requirements set a higher threshold of 65% of producers representing 51% of the milk or 51% of producers representing 65% of the milk. In other words, a petition to terminate the QIP under Chapter 3 requires more producer support than a petition to suspend Chapter 3.5.

This column appears in the Feb. 13 edition of the WUD e-newsletter and appears here with permission

Related article: CA: Quota Five-Year Sunset Proposal Submitted to California Ag Department