Thanks to a settlement between pork producer plaintiffs and USDA, the national pork checkoff will continue. However, it spells change for the industry.
The settlement agreement was entered into by USDA, a group of independent pork producers, the Michigan Pork Producers Association and National Pork Producers Council, which were the principal parties involved in the complaint filed in the Western District of Michigan, United States District Court, on Jan. 12, 2001.
Chief Judge Enslen issued a temporary restraining order on Jan. 19, 2001, blocking USDA from publishing the final rule in the Federal Register, terminating the checkoff.
A hearing on the lawsuit was originally scheduled for Feb. 2. It was delayed after USDA approached the plaintiffs requesting more time, the U.S. Department of Justice, to review the case.
Based on its review, the Justice Department advised USDA to settle the case. Court documents indicate that the plaintiffs (listed above) and USDA were the only parties listed in the lawsuit.
According to Barry Carpenter, deputy administrator for USDA’s Agricultural Marketing Service, the settlement agreement calls for a complete separation between NPPC and NPB. “The point is to make a clear distinction between industry programs and industry policy,” he adds.
Carpenter says that all of the programs were conducted within the rules of the Pork Act. But in light of the referendum vote, Secretary Veneman determined the reorganization was necessary. USDA will take a more active role in monitoring the transition until the agency is satisfied the transition is complete.
USDA decided a long court battle was not in the best interest of pork producers and importers. Besides, if the case went to court and USDA won, Carpenter says they still would have to justify ending the national checkoff program. The Justice Department believes their action is legally defendable.
A copy of the signed agreement between the parties and other referendum information, is available on the NPPC Web site at www.nppc.org.
Here’s a look at some of the key elements of the settlement agreement provided by USDA and NPPC.
- USDA will not terminate the national pork checkoff program. USDA has reviewed the decisions and circumstances involved in conducting the referendum and has determined that it could not be considered a binding referendum because it was not conducted under the provisions of section 1623 of the Pork Promotion, Research and Consumer Information Act of 1985. That Act requires that 15 percent of U.S. pork producers and importers must petition to request a referendum.
USDA considers last fall’s referendum to be advisory in nature. Despite the referendum results, the evidence is not conclusive that the pork checkoff program is not fulfilling the policy of the Pork Act.
- The defendants and plaintiffs agreed to the settlement that makes it legally binding. Neither the NPB nor the Campaign for Family Farms were involved in the settlement agreement. Court documents indicate these two parties were interveners, not a plaintiff or defendant in the lawsuit.
- USDA officials believe that a long legal battle over terminating assessments under the Pork Order would not be in pork producers and importers best interests. Agency officials believe that a proactive approach to resolving the issue is more appropriate. As a result, the NPB will sever ties with NPPC.
- As long as the national pork checkoff program is in effect, all pork producers and importers must pay the assessments. The rate of $.45 per every $100 value will remain the same.
- Under the terms of the agreement, the national pork checkoff will continue. However, NPPC and the NPB are required to operate independently of each other.
As a result, NPPC or its successor organization will be responsible for non-checkoff-funded policy (legislative/regulatory) issues. NPB will be responsible for checkoff-funded promotion, education and research programs.
- Checkoff dollars cannot be used for this purpose. NPPC and MPPA used funds from sources other than the checkoff to pay costs associated with the lawsuit.
- State pork producer associations are allowed to continue to perform both checkoff and non-checkoff functions. USDA will continue to audit state programs and activities to ensure adequate accounting and separation of all funds.
- All current NPPC staff who spend more than 50 percent of their time on checkoff programs will have the opportunity to become NPB employees. However, the current NPPC chief executive officer and chief financial officer are not eligible for transfer or employment with the NPB for a minimum of two years.
- NPPC owns the office building which was built with non-checkoff dollars. They have the option of selling or leasing the building. It’s likely that NPB will lease it in the short-term to expedite the transition. The long-term fate of the building is still to be determined.
Pork. The Other White Meat was developed before the checkoff was in place. All of the research was trademarked with non-checkoff funds. NPPC owns the trademark and has the option of leasing or selling this asset, whereas all of the advertising programs for Pork. The Other White Meat belong to the NPB.
- All elements of the settlement agreement must be completed no later than the conclusion of the 2002 NPB annual meeting. However, many elements, such as staff transfers and ceasing of joint communications, will occur as soon as possible. They need to show serious activity within 30 days of the settlement agreement.
NPB will be putting an interim CEO and CFO in place. They are considering appointing an independent third party, such as a PriceWaterhouse, Arthur Anderson or Edward D. Jones. There is a search committee in place to permanently fill the CEO position. They expect to have someone in place within 90-120 days.
The entire process will be a gradual transition, occurring in different stages. Both NPPC and the NPB have transition teams in place and will work with USDA to complete the process within one year. NPPC and NPD have 90 days to show that they’re working toward that goal.
- The NPB has always been responsible for collecting and distributing checkoff funds. Plus, developing, implementing and overseeing all checkoff-funded projects and programs.
The difference is that the NPB contracted all of the staffing and services out to others. Now, they will take over the day-to-day operations of these checkoff programs and services.
- NPPC’s role as the general contractor to the NPB will be terminated. NPPC has established a task force to determine the future role of the association. They will be largely limited to noncheckoff-funded policy issues relating to key legislative and regulatory issues. It appears NPPC will maintain a Washington, D.C. office. It hasn’t been determined if they will offices in other cities.
In addition, NPPC will need to look for ways to fund their regulatory and legislative efforts since they will not be receiving checkoff funds.
- The majority of planning and programming for the 2001 World Pork Expo is done. As a result, the settlement agreement will have only a modest impact on this year’s event, with the exception of a ban on all joint communications. The impact will be far greater on WPX 2002.
- The settlement doesn’t have any impact on the Pork Act or the Pork Order.
- The services and benefits resulting from checkoff-funded programs will continue. Program revisions and changes are yet to be determined.
- Given that the national checkoff will continue, the immediate need to implement various state checkoff programs may be eliminated.
- No officer or board member of NPPC or its successor organization may serve on the NPB during his or her NPPC term. There is a two-year waiting period before these producers become eligible for the NPB board.
- USDA will conduct a survey of eligible U.S. pork producers and importers no sooner than June 2003, to determine if 15 percent or more favor a referendum. This way, pork producers will have an opportunity to express their support or concern with the checkoff. If 15 percent of the eligible producers and importers request a referendum, one will be held in within one year to determine if the program will continue. USDA needs that amount to produce a binding referendum.