American Meat Institute COOL Rehearing Request Denied

On Oct. 31, the United States Court of Appeals for the District of Columbia Circuit denied a request for a rehearing on a motion for preliminary injunction to block implementation of the United States Department of Agriculture’s May 2013 final rule on country-of-origin (COOL) labeling for red meat. The rehearing request focused on the provisions of the rule prohibiting the commingling of meat, arguing that the requirement exceeded the authority of the Agricultural Marketing Service (AMS). That issue was not addressed by the en banc panel that decided American Meat Institute v. USDA (discussed here).

In a statement, AMI Interim President and CEO James Hodges noted “[t]he ban on commingling, which was the subject of this rehearing request, is a key component that made the 2013 rule even more onerous and burdensome than the previous rule, as was confirmed by the World Trade Organization’s recent report.” He also said, “The court’s refusal to rehear our motion will allow those harms to continue. We will evaluate our options.”

The challenge is all the more interesting because the World Trade Organization ruled last month, for the second time, that the United States has not done enough to fix the COOL law. Specifically, the WTO compliance panel found that the rule was less favorable to meat imports from Canada and Mexico and more favorable to domestically produced meats.

The Obama administration has 60 days to decide whether to appeal the ruling. In the interim, the COOL Reform Coalition, a group of agriculture interests said in a letter to Congress that if Mexico and Canada retaliate it could cost U.S. businesses billions of dollars in lost sales. The COOL Reform Coalition, said tariffs could be slapped on $1.3 billion in Iowa exports, with pork, corn, and soybeans among some products expected to be targeted.

"We request that Congress immediately authorize and direct the secretary of agriculture to rescind elements of COOL that have been determined to be non-compliant with international trade obligations by a final WTO adjudication,” the letter said.

Such action seems unlikely in light of a recent statement from Sen. Chuck Grassley, R-Iowa, and Sen. Tim Johnson, D-S.D. who said Congress should wait to see how the Obama administration responds. Grassley, a member of the Senate Agriculture Committee, said he did not believe Congress would do anything until the Agriculture Department and the United States trade representative decide if they will appeal the decision at the WTO. "We'll have to wait and see if the White House believes there is anything else that can be done administratively to bring COOL into compliance," Grassley said.

Why is this of any interest to corporate lawyers?  Recall that part of the initial challenge to the COOL law was that it improperly compelled corporate speech in violation of the First Amendment. That argument was rejected by the DC Court of Appeals who extended the rationale expressed in Zauderer v. Office of Disciplinary Counsel, to apply rational review to compelled corporate speech aimed at more than preventing consumer deception. The WTO’s objections to the COOL law is that it doesn’t not go far enough—that it does not provide sufficient information to consumers. If the United States does not appeal the WTO ruling, and instead attempts to amend the COOL law to address the WTO concerns by requiring more disclosure, we may see an opportunity to again explore the contours of compelled corporate speech, an issue with ramifications far beyond the meat industry.

Celia Taylor