Month: February 2014

Update: On March 20th, the plaintiffs in one of the cases (Rocky Mountain Farmers Union et al v Corey et al) referenced in this work, have petitioned the Supreme Court to hear its appeal.

Update: On March 5, Iowa, Oklahoma, Kentucky, Alabama, and Nebraska joined with Missouri in an Amended Complaint. The arguments are the same, the primary difference is the addition of other states. My arguments remain the same with a caveat that multiple states being involved does not add weight to the complaint. Well, other than the tax payers of these states should also express their curiosity as to why tax payer money is funding a legal fight benefiting one select industry.

Earlier: On February 3rd, 2014, the Attorney General for the state of Missouri, Chris Koster, filed suit in the Eastern District of California’s District Court challenging one of California’s egg laws. Some of the news stories about the lawsuit stated that Koster is challenging California’s well known Proposition 2, which ensures better living conditions for egg-laying hens. However, the Missouri AG is really challenging AB 1437, which was passed by the California legislature in 2010 in order to ensure that all shell eggs sold in California, regardless of origination, meet minimum living standards for the hens that lay them.

According to the Missouri complaint, AB 1437 violates the “dormant” Commerce Clause, by enacting a state law that discriminates against interstate or foreign commerce. But rather than go against the general context of the text, the complaint is targeting the alleged reasoning behind passing AB 1437 (to ensure all shell egg producers follow the same minimum requirements), as well as the timing (in-state producers received 2,249 days to come into compliance, while out of state producers received 1,640 days). The implication is that the law is “protectionist”, protecting California producers to the detriment of Missouri producers.

The complaint makes much of a report from the California Department of Food and Agriculture, which warned about a possible Commerce Clause challenge to AB 1437. In the report, the CDFA stated that the state might need to prove its allegations about food safety and cage size in order to avoid a constitutional challenge.

Pre-law warning aside, the case is going to be a difficult battle for the Missouri AG. The plaintiffs have to show that the law is deliberately discriminatory, or, failing this, that the out-of state producers’ pain outweighs the in-state benefits. In 2012, an in-state egg producer sued California because of Proposition 2, stating that the law was both unconstitutionally vague and in violation of the Commerce Clause. The lawsuit, William Cramer v. Edmund G. Brown, et alwas dismissed with prejudice by Judge John Walter who, in his decision, quoted from another case, Pacific Northwest Venison Producers v. Smitch:

If the regulations discriminate in favor of in-state interests, the state has the burden of establishing that a legitimate state interest unrelated to economic protectionism is served by the regulations that could not be served as well by less discriminatory alternatives…In contrast, if the regulations apply evenhandedly to in-state and out-of state interests, the party challenging the regulations must establish that the incidental burdens on interstate and foreign commerce are clearly excessive in relation to the putative local benefits.

The Cramer v. Brown lawsuit was about Proposition 2, which focuses on the animal welfare aspect of the regulations:

The purpose of this act is to prohibit the cruel confinement of farm animals in a manner that does not allow them to turn around freely, lie down, stand up, and fully extend their limbs.

Though the stated basis for both California egg laws differs, they are complementary, with an end result that’s the same: a minimum set of standards governing the environment for hens whose eggs are intended for human consumption within California. .

Throughout the Koster complaint, much is made of ancillary reports and publications related to AB 1437 and the fact that the law levels the playing field for California egg producers. This actually forms the basis for the legal challenge: that the bill only impacts on producers external to the state (since Proposition 2 impacts on producers internal to the state), and therefore places an undue burden on these out-of state producers.

The legislative history of AB 1437 suggests that bill’s true purpose was not to protect public health but rather to protect California farmers from the market effects of Prop 2 by “leveling the playing field” for out-of-state egg producers.

However, Koster’s legal challenge doesn’t demonstrate how out-of state producers are economically disadvantaged in relation to in state producers, other than the in state producers had longer to implement changes. Even then, the complaint text is breathtakingly disingenuous when it claims, “If Missouri farmers want to continue selling eggs in the California market on January 1, 2015…those farmers need to begin making the necessary capital improvements to their farms now…”

Well, yes, but then Missouri farmers have been aware of the 2015 deadline since July of 2010 in order to make those changes. That Koster didn’t decide to file the lawsuit until now is more a measure of *Missouri politics than logistical impossibilities.

What the complaint does mention is that Missouri egg producers had an advantage over California egg producers after Proposition 2 was passed, and it was the loss of this advantage that led to violation of the Commerce Clause:

63. AB1437 and 3 CA ADC § 1350(d)(1) violate the Commerce Clause because they are protectionist measures intended to benefit California egg producers at the expense of Missouri egg producers by eliminating the competitive advantage Missouri producers would enjoy once Prop 2 becomes effective.

Must states protect other state producers’ advantage? To understand whether this is a viable claim, we need to take a closer look at the Commerce Clause.

The Commerce Clause grants Congress the power to regulate commerce between states. The “dormant” Commerce Congress is an implied negative converse: states are prohibited from passing legislation that adversely or improperly impacts on interstate commerce. Interpretation of the law has been refined over time. Now, the courts first determine whether the state law discriminates against out of state interests in deference to the states own producers, either deliberately or incidentally. If the legislation is deliberate and protectionist, then the state is out of luck. However, if the discrimination is a side effect of the act then it’s up to the state to provide arguments why the ends it needs to achieve can’t be achieved any other way.

So how does AB 1437 fit into this? Interestingly, so.

If you sell shell eggs in California, you have to follow the same requirements regardless of your location. Proposition 2 started this process by requiring minimum standards for egg hens within the state, but if we took away Proposition 2, the same requirements would still exist because of AB 1437. Technically, AB 1437 seemingly does “discriminate” against out-of state producers more than in-state producers, since its focus is on the eggs sold in the state, rather than the hens within the state. However, the text of AB 1437 doesn’t differentiate based on location or producer, and neither does California statute 3 CA ADC § 1350(d)(1):

Commencing January 1, 2015, no egg handler or producer may sell or contract to sell a shelled egg for human consumption in California if it is the product of an egg laying hen that was confined in an enclosure that fails to comply with the following **standards.

Now the question becomes: does the fact that Missouri no longer has an advantage over California producers constitute “discrimination”? There is one Supreme Court case, Hunt v. Washington State Apple Advertising Commission, which seems to imply so.

North Carolina passed a law that apples had to have a USDA label. Washington State apple producers didn’t want to use the USDA label because Washington state standards actually exceed USDA standards—a fact that gives Washington apple growers an advantage over North Carolina apple growers. Washington state growers challenged the law, stating that it violated the Commerce Clause because the law degraded the Washington state growers’ advantage.

The Supreme Court agreed, which does seem to corroborate the notion that removing an out-of state producer’s advantage is discriminatory. However, there’s some subtlety to the ruling. According to the Oyez entry:

The Court voted unanimously that the North Carolina regulation was an unconstitutional exercise of the state’s power over interstate commerce. Although the regulation was facially neutral, it had a discriminatory impact on the Washington growers while shielding the local growers from the same burden. The regulation removed the competitive advantage gained by the Washington apples from stricter inspection standards. The regulation produced a leveling effect that works to the local advantage by “downgrading” apples from other states unjustly. Therefore, the regulation places an unreasonable burden on interstate commerce.

And therein lies the catch: the North Carolina apple producers were already using the USDA labels, so the new law had no impact on them. Unlike the North Carolina apple producers, the California egg producers have to follow a new law beginning in 2015—the same law that out-of state producers have to follow. Unlike the North Carolina apple producers, no one is “advantaged” on January 1, 2015 with the California laws. Or, in the egg producers’ perspective: all parties are disadvantaged, equally.

If the law isn’t deliberately discriminating, then the judge applies what is known as the “Pike balancing test” from the case, Pike v. Bruce Church, Inc..

Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits.

The judge has to balance the benefits of the law against the burden imposed on out-of state producers.

Does California have a right to pass laws that support its citizens animal welfare and food safety interests? Judge Walter in Cramer v. Brown believes so.

As Plaintiff admits, the prevention of animal cruelty is a legitimate state interest. See United States v. Stevens, __ U.S. __, 130 S. Ct. 1577, 1585 (2010) (“[T]he prohibition of animal cruelty itself has a long history in American law, starting with the early settlement of the Colonies.”). In order to outweigh this legitimate state interest, Plaintiff must allege facts that demonstrate that the incidental burdens on interstate commerce are clearly excessive in relation to the local benefit and that these burdens are substantial. See National Ass’n of Optometrists & Opticians v. Harris, 682 F.3d 1144, 1148 (9th Cir. 2012) (“A critical requirement for proving a violation of the dormant Commerce Clause is that there must be a substantial burden on interstate commerce.”). Instead, Plaintiff alleges purely hypothetical and entirely speculative burdens on interstate commerce. Moreover, those hypothetical and speculative burdens, even if they are realized, are not clearly excessive in relation to the legitimate state interest in preventing cruelty to animals.

Another California court decision corroborates Judge Walter’s decision. Recently the Ninth Circuit Court of Appeals affirmed a judicial decision to deny a preliminary injunction against one of California’s foie gras ban laws. This lawsuit also contends that the law is a violation of the dormant Commerce Clause. The judges disagreed:

Plaintiffs contend that § 25982 targets wholly extraterritorial activity because it is “aimed in only one direction: at out-of-state producers.” Plaintiffs reason that § 25982 is “apparently directed at farmers who feed their ducks and geese outside [California],” because § 25981 already prohibits businesses in California from force feeding birds.

Plaintiffs misinterpret the interplay between the statutory provisions. Plaintiffs assume that § 25981 and § 25982 are functionally equivalent, with § 25981 targeting California entities and § 25982 targeting out-of-state entities. In truth, § 25981 serves an entirely different purpose than § 25982. Section 25981 prohibits entities from force feeding birds in California. But for § 25981, a California producer could force feed ducks in California, and then sell foie gras outside of California. Section 25981, however, does not prohibit the sale of products produced by force feeding birds. That is where § 25982 comes in. Section 25982 applies to both California entities and out-of-state entities and precludes sales within California of products produced by force feeding birds regardless of where the force feeding occurred. Otherwise, California entities could obtain foie gras produced out-ofstate and sell it in California. Thus, Plaintiffs’ assertion that § 25982 is directed solely at out-of-state producers is incorrect.

The case is still ongoing, but if the decision is any indication, has little chance for success.

Returning to AB 1437, contrary to the assertions in the complaint that the new regulations, “serve no legitimate state purpose because they do not protect the welfare of any animals within the State of California, and their stated purpose—to prevent salmonella contamination—is pretextual”, the new regulation does serve the legitimate interests of the citizens of the state as to the safety of the food they eat. The text of AB 1437 references both the Pew Commission on Industrial Farm Production and the World Health Organization in their findings of proportionally higher level of salmonella contamination associated with stress, and that the hen’s stress level is directly related to the environment in which it is kept. A quick Google search brings up several other studies and reports that also make a connection between environment and hen health, and hence egg safety.

The Missouri AG disagrees. The complaint, in effect, places the court in the position of having to determine the credibility of scientific findings it has neither the skill nor background to judge.

It is just this difficulty that has led the Roberts Court to cast a jaundiced eye against the Pike Balancing Test, and, indirectly, against the dormant Commerce Clause, itself. And in our court system, interpretation of law flows down hill.

The Koster complaint doesn’t rely solely on the Commerce Clause in its arguments. The complaint also claims that the Federal Egg Products Inspection Act (FEPA) implicitly preempts the California laws, and they are therefore null and void under the Constitution’s Supremacy Clause. It’s an odd argument, considering Missouri’s own frequent attempts to explicitly nullify federal law.

Regardless of the unintended irony of the claim, the FEPA focuses specifically on egg processing and processing facilities, and not on the environment housing egg hens. At most, the state and federal laws complement each other. I have to assume this argument in the complaint is the legal equivalent of throwing everything at the wall and hoping somethingsticks.

Before he filed, Koster stated the following in an interview with the Kansas City Star:

“This is not an agriculture case, and it’s not just about egg production,” Koster said. “It’s about the tendency by California to press the boundaries of intrusion into an area protected by the Commerce Clause of the U.S. Constitution.”

In another case currently under way in the California federal courts, Rocky Mountain Farmers Union v. Corey, several out-of state fuel suppliers sued the state of California regarding its Low Carbon Fuel Standard (LCFS). The groups claimed that the standard placed an undue burden on producers outside of California, and hence the regulations were in violation of the dormant Commerce Clause. A federal judge initially agreed, but the decision was overturned by the Ninth Circuit Appeals court. What stood out for me in the court’s decision, other than it being a victory for cleaner air, is the following:

Our conclusion is reinforced by the grave need in this context for state experimentation. Congress of course can act at any time to displace state laws that seek to regulate the carbon intensity of fuels, but Congress has expressly empowered California to take a leadership role as to air quality. If GHG emissions continue to increase, California may see its coastline crumble under rising seas, its labor force imperiled by rising temperatures, and its farms devastated by severe droughts. To be effective, California’s effort to combat these harms must not be so complicated and costly as to be unworkable. California’s regulatory experiment seeking to decrease GHG emissions and create a market that recognizes the harmful costs of products with a high carbon intensity does not facially discriminate against out-of-state ethanol.

While Congress hasn’t specifically anointed California to take on food safety or animal welfare issues, our country has long encouraged states to be the vanguard when it comes to change. Right now, states are taking the initiative with gay marriage and marijuana use, to mention two that are frequently in the news. These states become, in effect, laboratories where change is tested, and laws are refined. Such refinement can then be used to better craft laws that apply to all states.

In addition, changes at the state level can lead to acceptance of federal laws in today’s political environment where anything new coming from the US government is treated as suspect. An attempt to incorporate minimum requirements for egg hens at a national level has not been successful, even though it is supported by both egg producers and animal welfare groups, because there hasn’t been enough impetus for the change at the state level yet. Come January 1, 2015, the impetus will increase.

In my opinion, Chris Koster is wrong in his conclusions about the California laws, and it’s highly unlikely that his suit will prevail in court. Stories about the court case have stated that Koster expects the case to cost the state of Missouri only about $10,000 in legal fees. Legal battles of this nature are very expensive, so I have to assume Koster expects the case to be dismissed relatively quickly, and rightfully so.

Then Missouri Attorney General Chris Koster will have to explain to the citizens of the state of Missouri why he’s using tax payer money for a lawsuit that should have been filed by the egg producers, themselves, as is usual with court cases of this nature.

* Since Chris Koster is planning on a run for Governor, and since the Missouri Farm Bureau has inordinate influence in Missouri elections, I’ll leave it up to the reader to speculate as to the exact nature of the Missouri politics.

** What standards? An enclosure with 9 or more hens must provide 116 square inches of floor space per bird; less than nine, a formula is used (322 + [(n – 1) x 87.3] / n, where “n” is number of birds). Oh, and birds must have access to food and water. This is a space about 11 inches square, with access to food and water. This is not the bird equivalent of Four Seasons. It’s not even a bird equivalent of Motel 6. That egg producers consider this burdensome should give everyone pause.