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An animal rights group took exception to California’s popular “Happy Cows” campaign Tuesday, calling it false advertising during arguments in a San Francisco appellate court. People for the Ethical Treatment of Animals Inc. accused the California Milk Advisory Board of violating the state’s unfair competition law by portraying an idyllic lifestyle for California dairy cows while knowing they endure a “harsh, uncomfortable and often painful existence.” “The state is advertising falsely,” Matthew Penzer, legal counsel for Norfolk, Va.-based PETA, argued in court. “And that kind of advertising is prohibited.” First District Court of Appeal Justices Ignazio Ruvolo, J. Anthony Kline and Paul Haerle were all business in addressing PETA’s claims that the state-supervised milk board is violating Business and Professions Code �17200. The justices grilled both sides hard. The key question for the court was not whether the ads were false but whether the milk board was subject to the unfair competition law. The ubiquitous ads portray dairy cows in bucolic bliss on sunny green pastures lined with white picket fences, enjoying earthquake hoof massages and recounting horrific Midwestern winters. The TV ads end with an announcer proclaiming: “Great cheese comes from happy cows; happy cows come from California.” PETA contends that the ads have no basis in reality — that California cows live in feces-soaked dirt lots devoid of vegetation and are kept pregnant almost their entire adult lives. The cows suffer from an assortment of diseases caused by intensive rearing, they say, and their calves are packed in veal crates or slaughtered. Now-retired San Francisco Superior Court Judge David Garcia tossed the suit last year, saying that the state and its agencies are exempt from false advertising laws. His decision was based on California Medical Association Inc. v. Regents of the University of California, 79 Cal.App.4th 542, a 2000 Second District opinion that said a public entity is not a person within the meaning of the unfair competition law and, therefore, cannot be sued. Justice Ruvolo mentioned that case, noting that the Second District reached its conclusion by looking to the “plain meaning” of the 17200 statute. Justice Kline piled on by suggesting that the milk board’s “Happy Cows” campaign was a just exercise of the state’s police powers. Penzer cited Community Memorial Hospital of San Buena Ventura v. County of Ventura, 50 Cal.App.4th 199, a 1996 Second District ruling that seems to exempt state entities from liability but only if they are undertaking acts in the exercise of the state’s sovereign powers. False advertising, he argued, is not one of those powers and is, in fact, prohibited by law. San Francisco-based Deputy Attorney General Tiffany Yee, representing the milk board, tried to compare the “Happy Cows” campaign with Gov. Arnold Schwarzenegger’s current trip to Japan. Both are promoting California as a great place with great commodities, she said, but reasonable people can disagree. Kline stopped her short, however, saying Schwarzenegger’s trip isn’t the same. On the one hand, there’s no doubt that the governor is exercising the sovereign powers of the state, he said, and on another, PETA’s argument “is that the ‘Happy Cows’ campaign is a lie.” Though PETA brought its claim under 17200, Proposition 64 — the voter-approved measure scaling back the state’s unfair competition law — was hardly mentioned in the case. At one point, Kline observed that Penzer, an out-of-stater, might not be aware of the initiative. Penzer said he was aware of the proposition but argued that it made his case even more important. The measure had placed a greater burden on the AG’s office, he said, so it likely wouldn’t pursue the issue or couldn’t because of budget concerns. Yee said, though, that PETA could have pursued a remedy through the California Marketing Act — by asking the director of the state Department of Food and Agriculture to refer the case to the AG. Kline immediately asked whether the director had ever asked the AG’s office to prosecute a board within his own agency. “My guess is that it’s unlikely in the extreme,” he said. “So, in reality, there is no remedy under the marketing act.” On rebuttal, Penzer said the unfair competition law was put into place to preserve the public’s right to fight unfair business practices. “That’s what we’re taking advantage of,” he said. “We’re not looking for damages. We just want to stop this conduct.” Outside court, Penzer said there’s no justification to exempt the state from laws against false advertising or telling the public they have no power to stop such ads. “It’s such an important issue,” he said. “You’re taking what the state has already said is an important power of the people and exempting the state.” “Create a clever ad,” he continued. “Sell your product. Don’t do it unlawfully.” The case is People for the Ethical Treatment of Animals Inc. v. California Milk Producers Advisory Board, A103481.

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