PEOPLE LOCKYER v. SHAMROCK FOODS COMPANY (1999)

Defendant and appellant Shamrock Foods Company (Shamrock) is an Arizona milk processor which sells its product in California.   In 1996 plaintiff and respondent State of California (State) brought suit, seeking civil penalties and injunctive relief, alleging that Shamrock sold milk in this state which did not meet compositional and labeling standards set by the Food and Agriculture Code ¹ and made statements about its milk which were false, misleading or deceptive.   State prevailed.   Shamrock was enjoined from selling milk in California which did not meet code standards and was ordered to pay $696,000 in civil penalties.

Shamrock appeals, arguing that properly interpreted, the code allows the sale in California of its milk as composed and labeled, that restrictions on the sale in California of milk meeting federal labeling standards would violate liberty interests guaranteed by the California Constitution, that the trial court erred in admitting milk test results since duplicate samples of the milk tested were not provided Shamrock as required by section 32732 and that the civil penalties imposed were unreasonable.   We reverse.

BACKGROUND

In July 1996, pursuant to Business and Professions Code sections 17200 et seq., State sought injunctive relief and civil penalties, claiming Shamrock sold milk in California that did not meet code requirements established in sections 32901, 32913, 32914, 35784, 38181 and 38211 for the composition, labeling and description of its fluid milk products.

Shamrock answered it was in compliance with the code.   It cited section 32912 which it interpreted as allowing the sale of milk in California that did not meet code standards as long as the milk is labeled in accordance with applicable federal law.   Shamrock alleged its milk met or exceeded the standards of identity and composition required by federal law and that its milk, therefore, met California's code requirements and was not deceptively labeled.

The trial court rejected Shamrock's interpretation of section 32912, finding instead that it was the intent of the Legislature, in enacting section 32912 and other related sections, to require processors to comply with California's compositional, labeling and descriptive requirements for milk.

The trial court made findings concerning the number of deliveries of milk made by Shamrock in California.   Using those figures, it assessed civil penalties in the amount of $696,000.   Shamrock was enjoined from selling milk in California that did not comply with code compositional standards.

DISCUSSION

A. Arguments

Shamrock was assessed civil penalties and enjoined from selling its milk in California since the trial court found its product failed to meet the compositional and labeling requirements of sections 32901, 32913, 32914, 35784, 38181, 38191 and 38211.²

Shamrock argues that while its milk did not meet those standards, it nonetheless could sell its product in California because it complied with section 32912.   Section 32912 states:  “Any milk or milk product, frozen dessert, or cheese that is subject to a standard of identity or standard of composition defined in this division may be specifically formulated or processed to lower the content of its milkfat, alter its milkfat composition, or otherwise modify its nutrient profile to the extent that it will not comply with the compositional requirements of its standard of identity or composition.   These modified foods shall be labeled in accordance with the applicable provisions of Title 21 of the Code of Federal Regulations.”

State takes a different view of the meaning of section 32912.   It noted the section does not provide definitions for some of its terms, e.g., “nutrient profile,” and does not on its face allow or even mention the sale in California of milk that does not meet code standards.   It further argued Shamrock's reading of the section would amount to a disfavored repeal by implication since the effect of Shamrock's interpretation would be to render meaningless California's more demanding milk composition and labeling standards.   Finally, State argues Shamrock's interpretation is contrary to the legislative history of the section.

B. Shamrock, California and the Regulation of Milk

For decades California has statutorily regulated the composition of milk.   In 1990, however, the federal government enacted the Nutritional Labeling and Education Act (NLEA) which in relevant part stated that federal standards for the composition and labeling of milk preempted conflicting state standards “as to any food in interstate commerce -.”  (21 U.S.C.A. § 343-1(a).)   The federal standards established under the NLEA were lower than California standards.   The act, however, allowed states to seek exemption from its standards.  (21 U.S.C.A. § 343-1(b).)

In 1992 Shamrock began selling milk in California.

In May 1994 California enacted Assembly Bill (AB) 444 which as to most milk products conformed its standards to those of the federal government.   With regard to fluid milk, however, California left its higher standards in place.   AB 444 also created the version of section 32912, the meaning of which is the subject of this appeal.

In October 1994, the California Department of Food and Agriculture (CDFA) informed Shamrock its milk did not meet California standards and was subject to being impounded.   Shamrock filed an action in federal court, claiming California's standards could not be enforced since they had been preempted.   The federal court agreed, stating that until an exemption was granted, Shamrock was required only to meet federal standards for its milk.

On April 4, 1996, while California's request for exemption was pending, the Federal Agriculture Improvement and Reform Act became effective.   As part of that act, California was exempted from federal milk standards.  (7 U.S.C.A. § 7254;  Shamrock v. Veneman (1998) 146 F.3d 1177, 1180.)   On April 26, 1996, the CDFA informed Shamrock it would enforce state standards and the present case ensued.

C. Statutory Interpretation

The core of this case is the proper interpretation and thus statutory construction of section 32912.

 “ ‘The goal of statutory construction is to ascertain and effectuate the intent of the Legislature.’  [Citation.]”  (Calvillo-Silva v. Home Grocery (1998) 19 Cal.4th 714, 724, 80 Cal.Rptr.2d 506, 968 P.2d 65.)   While easily stated, the task is not always simple.   As a general rule we first look to the plain language of the statute itself within the context of legislative enactment of which it is a part.   If it is clear and unambiguous, we apply it.   If the intent of the Legislature is not patent, we take notice of related legislation, the historical context of the statute and documents connected with the enactment which hopefully illuminate what plain language has left opaque.   Since even with such interpretive aids legislative intent may still not be clear, we guide our interpretation with a series of maxims generally based on the presumption that the Legislature acts legally, logically, grammatically, consistently and knowingly.  (Briggs v. Eden Council for Hope & Opportunity (1999) 19 Cal.4th 1106, 1119, 1120, 81 Cal.Rptr.2d 471, 969 P.2d 564;  People v. Coronado (1995) 12 Cal.4th 145, 151, 48 Cal.Rptr.2d 77, 906 P.2d 1232;  DuBois v. Workers' Comp. Appeals Bd. (1993) 5 Cal.4th 382, 387-388, 20 Cal.Rptr.2d 523, 853 P.2d 978;  People v. Pieters (1991) 52 Cal.3d 894, 898-899, 276 Cal.Rptr. 918, 802 P.2d 420;  Tiernan v. Trustees Of Cal. State University & Colleges (1982) 33 Cal.3d 211, 218-219, 188 Cal.Rptr. 115, 655 P.2d 317;  Kane v. Hurley (1994) 30 Cal.App.4th 859, 862, 35 Cal.Rptr.2d 809;  Halbert's Lumber, Inc. v. Lucky Stores, Inc. (1992) 6 Cal.App.4th 1233, 1237-1239; , 8 Cal.Rptr.2d 298 5 Witkin, Summary of Cal. Law (9th ed.   1998) Torts, §§ 94-106;  58 Cal.Jur.3d, Statutes, §§ 82-153.)

 Statutory meaning is a question of law which we review de novo.   (Cal-Air Conditioning, Inc. v. Auburn Union School Dist. (1993) 21 Cal.App.4th 655, 667, 26 Cal.Rptr.2d 703.)

1. The Plain Meaning of Section 32912

 On its face, section 32912 plainly allows the formulation or processing of certain dairy products, including milk, such that they do not meet California compositional standard for that product as long the product is labeled in accordance with the applicable provisions of title 21 of the Code of Federal Regulations.

State argues such apparent plain meaning is, in fact, unclear in the present context since section 32912 says nothing about the sale and delivery of milk.   State notes its action against Shamrock was not based on the formulation or processing of milk but rather on the delivery and sale of milk that did not conform to California standards.

We do not believe, however, section 32912 can be read in isolation.   The section is part of an integrated whole, the purpose of which is to ultimately regulate, among other things, the sale and delivery of milk.   In order to have any meaning in the context of the whole statutory scheme, section 32912 would seem to allow not the mere formulation, processing or labeling of milk that does not comply with code standards but the sale and delivery of that milk as well.

State argues the section can be read merely as allowing California processors to formulate milk that does not comply with code standards in order to sell it in other states.   We disagree.   First, the language of the section does not so restrict its reach.   Second, since California has no interest in the regulation of federal standard milk in any other state, it is difficult to accept that the Legislature included section 32912 merely to assure California processors they could do what federal law allowed them to do.

State also argues the meaning of section 32912 is not clear and unambiguous since the section uses terms, i.e., “standard of identity,” “standards of composition” and “nutrient profile,” that do not have plain and commonsense meanings.

While it may be that the cited terms do not have commonsense meanings, they are not unclear or ambiguous.   Section 32912 refers not simply to standards of composition and identity but rather to such standards “defined in this division.”   Those standards are not difficult to find;  they were, after all, the basis for and were cited in State's complaint.   Neither is there anything unclear about the term “nutrient profile.”   Code sections define various types of milk depending on their percentages of milk fat and “solids not fat.”  (See §§ 35784, 38181, 38211.)   There appears no dispute about the meaning of the profiles required by the code for milk or that Shamrock did not meet those Code standards.

State also argues that interpreting section 32912 to allow the sale of milk in California meeting federal but not state standards of composition would result in a disfavored repeal of the California's milk standards by implication.   (See Western Oil & Gas Assn. v. Monterey Bay Unified Air Pollution Control Dist. (1989) 49 Cal.3d 408, 420, 261 Cal.Rptr. 384, 777 P.2d 157.)   The implied repeal suggested, however, is not by legal effect but by economic result.   State argues since it is more expensive to produce state standard milk than federal standard milk, no producer, in or out of state, will (for economic reasons) comply with State's higher standard.   We do not know if this is true.   A market might well exist for a higher standard milk.

State argues there is no evidence the Legislature intended in enacting section 32912 to allow producers to choose between state and federal milk standards and thereby effectively repeal the more stringent state standard.   We think this ignores the fundamental dilemma facing the Legislature in enacting AB 444.   On the one hand, State wished to retain its own standards for fluid milk.   On the other hand, the NLEA, with its preemptive effect, made the retention of an exclusive state standard illegal until an exemption could be obtained.   We simply cannot read AB 444 as an attempt to ignore federal law.   Section 32912, with its provision allowing for the formulation of milk to a standard lower than that prescribed by state law as long as it was labeled in accordance with federal law, resolved, if not happily, State's dilemma.

Although California was eventually exempted from federal milk standards, the Legislature has not amended section 32912 and its provisions allowing the formulation of milk federal standards remains in effect.

2. Legislative History

While it is unnecessary we do so, we nonetheless review the legislative history of AB 444.

As noted, California for decades had statutes setting standards for the composition, labeling and description of not only fluid milk but also for other dairy products.   In 1990 the federal government enacted the NLEA which in relevant part stated that federal standards for the composition and labeling of milk and other dairy products preempted conflicting state standards as to any food in interstate commerce.  (21 U.S.C.A. § 343-1(a).)   The federal standards established under the NLEA were lower than California standards.   The act allowed states to seek exemption from its standards.  (21 U.S.C.A. § 343-1(b).)

AB 444 was introduced on February 11, 1993.   The bill was short and dealt solely with the labeling requirements for “extra light milk” contained in section 38193.  (Assem. Bill No. 444 (1993-1994 Reg. Sess.) § 1.)

An analysis by the Senate Committee on Agriculture and Water Resources cited the preemptive effect of the NLEA. It noted, however, federal law allowed limited administratively granted exceptions and that California had petitioned for such an exception with regard to four categories of fluid milk.   It stated seeking exception was based on the belief that California's standards are more stringent than federal ones.  (Sen. Com. On Agriculture and Water Resources, Analysis of Assem. Bill No. 444 (1993-1994 Reg. Sess.) as introduced Feb. 11, 1993, p. 1.)

It added that the largest discrepancy between California and federal standards involved the labeling of “extra light milk.”   It stated it was believed if the California labeling requirement was changed to bring it closer to the federal standard, there was a greater likelihood the petition for exemption would be granted.  (Sen. Com. On Agriculture and Water Resources, supra, Analysis of Assem. Bill No. 444 at p. 1.)

As amended in the Senate on March 24, 1993, the scope of the bill was greatly expanded.   It repealed statutory standards for a host of dairy products, but not fluid milk, and replaced them with the federal standards.   An urgency clause was added since the food and labeling provisions of the NLEA were to become effective on May 8, 1994.  (Sen. Amend. To Assem. Bill No. 444 (1993-1994 Reg. Sess.) March 24, 1994.)

The legislative digest for the bill noted that existing law provided standards and labeling requirements for various dairy products.   It listed some of those products and stated that the bill would repeal those statutes and require those foods be labeled in accordance with regulations of the federal Food and Drug Administration.  (Legis. Counsel's Dig., Assem. Bill No. 444 (1993-1994 Reg. Sess.) as amended March 24, 1994.)

The amendment repealed the existing version of section 32912 and replaced it with the following:  “Any milk product, frozen dessert, or cheese that is subject to a standard of identity or standard of composition defined in this division may be specially formulated or processed to lower the content of its milk fat, alter its milk fat composition, or otherwise modify its nutrient profile to the extent that it will not comply with the compositional requirements for its standard of identity or composition.   These modified foods shall be labeled in accordance with the applicable provisions of Title 21 of the Code of Federal Regulations.”  (Sen. Amend. to Assem. Bill No. 444 (1993-1994 Reg. Sess.) March 24, 1994, § 2.)

In this form section 32912 did not refer to fluid milk.

The bill analysis prepared for the Senate Committee on Agriculture and Water Resources dealing with the March 24, 1994, amendment to AB 444 stated it “conforms California's composition and labeling standards for milk products (except for fluid milk) with federal law and regulations.”  (Sen. Com. On Agriculture and Water Resources, Analysis of Assem. Bill No. 444 (1993-1994 Reg. Sess.) as amended March 24, 1994, p. 1.)

The analysis cited the preemptive effect of the NLEA, noted exemptions were possible and that California was seeking one for fluid milk.   It added that the largest discrepancy between California and federal standards involved the labeling of “extra light milk.”   It stated it was believed if the California labeling requirement was changed to bring it closer to the federal standard, there was a greater likelihood the petition for exemption would be granted.  (Sen. Com. On Agriculture and Water Resources, supra, Analysis of Assem. Bill. No. 444 as amended March 24, 1994, at pp. 1-2.)

AB 444 was amended again on May 5, 1994.   The bill remained largely as amended on March 24, 1994.   Section 32912 was amended, however, with the addition of fluid milk as an item coming within its provisions.  (Sen. Amend. to Assem. Bill No. 444 (1993-1994 Reg. Sess.) May 5, 1994, § 2.)

A bill analysis prepared for the Senate Rules Committee indicated the May 5, 1994, amendment “[m]akes technical changes in order to attain full conformity with federal law (e.g., spelling, headings, inclusion of milk products covered by federal law).”  (Sen. Rules Com., Office of Sen. Floor Analyses, Analysis of Assem. Bill No. 444 (1993-1994, p. 1.) The analysis stated that the bill “[c]onforms California's composition and labeling standards for milk products (except for fluid milk) with law and regulations.”  (Sen. Rules Com., supra, at p. 1.)

The bill analysis prepared after the May 5, 1994, amendment for the Assembly Committee on Agriculture noted the preemptive effect of the NLEA and stated AB 444 repealed portions of California law which conflicted with federal law but preserved those aspects of California law unique to this state and which do not conflict with federal law.  (Assem. Com. on Agriculture, Analysis of Assem. Bill No. 444 (1993-1994) Reg. Sess.) as amended May 5, 1994, p. 1.) It stated a main component of the bill was to “conform[ ] state law to federal law with respect to dairy product ingredients and labeling.”  (Assem. Com. on Agriculture, supra, at p. 2.)

The Assembly Agriculture Committee Republican Analysis of the May 5, 1994, version of AB 444 stated that California's fluid milk standards were not in compliance with the NLEA. It stated the bill “brings the product into compliance with federal labeling requirements.”  (Assem. Com. on Agriculture, Republican Analysis of Assem. Bill No. 444 (1993-1994 Reg. Sess.) as amended May 5, 1994.)

We find nothing in this legislative history that contradicts our conclusion concerning the plain meaning of section 32912.

Because section 32912 permitted Shamrock to sell its milk in California, the trial court erred in finding Shamrock violated California law and in finding Shamrock violated the court's preliminary injunction, which itself merely prohibited violations of California law.   Because by its terms section 32912 only required Shamrock meet federal labeling requirements, the trial court also erred in finding Shamrock was guilty of any deceptive practices.   Because there are no other grounds in the record which support it, the judgment of the trial court imposing a fine and enjoining the sale in California of Shamrock's milk is reversed.

FOOTNOTES

1.   All undesignated statutory references are to the Food and Agriculture Code.

2.   Section 32901 [sale of milk not conforming to standards set by code], section 32913 [use of substance name when such substance does not conform to definitions and standards prescribed by code], section 32914 [use of misleading statements or advertising as to product defined in code], sections 35784, 38181, 38191, 38211 [standards for milk]

BENKE, Acting P.J.

HALLER, J., and O'ROURKE, J., concur.