A victory for the long-standing milk quota and dairy farmers statewide

California's dairy farmers -- with Niall P. McCarthy as their lead counsel -- successfully fought off a corporate campaign to end the complex milk pricing, quota and income pooling system that has been in place since the 1960s to equalize revenue for producers.

McCarthy and Cotchett, Pitre & McCarthy, LLP senior associate Andrew F. Kirtley saved hundreds of dairies from insolvency and the nation's milk supply from disruption. Stop QIP Tax Coalition v. California Dept. of Food & Agriculture et al., 34-2020-80003474 (Sacramento Co. Super. Ct., filed Dec. 4, 2019).

"We were facing a bunch of white-shoe lawyers from the East Coast," said McCarthy, "who wanted to wipe out small dairy farmers who have been in business for 100 years and replace them with large corporate factory farms."

He added that he came to consider the state's 1.7 million milk cows part of his client base. "On these small farms, the cows are part of the family."

The so-called Quota Implementation Plan, or QIP, developed over the decades into an active financial asset market. The equity value of the asset has historically been over $1 billion. Quota, as the plan is known, is especially important to rural communities in Sonoma, Napa and the Central Valley, where smaller, multigenerational, organic dairies have invested huge sums to maintain the market's stability, while elsewhere, industrial-scale mega-dairies have focused on rapid expansion.

In 2019, a special interest group calling itself "Stop QIP Tax Coalition" launched an aggressive legal campaign to immediately terminate quota for their own financial gain. Their campaign slashed the equity value of quota by more than 70% to $300 million. The national agricultural press called it a "milk civil war."

The legal attacks, based on numerous novel theories, included a half dozen agency petitions for statewide referendums, two Superior Court lawsuits, a multiday evidentiary hearing before an administrative law judge with nearly 100 witnesses and multiple trips to the state Court of Appeal.

Mounting a broad defense to retain the quota system, McCarthy and Kirtley fought on several fronts. "I became the milk quota expert," said Kirtley, whose primary role was legal research and brief writing. "It was obvious to us our clients' farms were on the line here."

The pair won every case, restoring more than $500 million in quota asset value to their clients.

"The hardest part was taking the complicated concept behind the quota system and distilling it so the court could see the impact the lawsuit would have if the plaintiffs prevailed," McCarthy said.

"But if you think lawyers work hard, you should see a milk farmer. After we won, we celebrated with beverages stronger than milk."

- John Roemer