The California Egg Law and the Dormant Commerce Clause

    In 2008 California voters approved the Prevention of Cruelty to Farm Animals Act, which provided that after January 1, 2015 a “person shall not tether or confine any covered animal, on a farm, for all or the majority of any day, in a manner that prevents such animal from: (a) Lying down, standing up, and fully extending his or her limbs; and (b) Turning around freely.” In part, this measure was intended to free laying hens from the claustrophobia of so-called battery cages, where the hen is confined to a space, shared with several other hens, that permits each hen no more 67 square inches. That’s 10 inches by 6 3/4 inches, less than the size of a standard sheet of copying paper.  Giving hens space to stretch their wings costs money: the old cages must go, new ones purchased, and fewer hens can be accommodated in the same building that housed them in battery cages.  California egg producers, placed at a competitive disadvantage because out-of-state producers were not subject to the law lobbied for and obtained an additional law, AB1437, that after January 1, 2015 forbids the knowing sale of any eggs in California that have not been produced under the conditions applicable to California producers. A legislative committee stated that the intent of AB1437 was to level the playing field to prevent disadvantage to California egg producers. But law actually says its intent was to “protect California consumers from the deleterious, health, safety, and welfare effects of the sale and consumption of eggs derived from egg-laying hens that are exposed to significant stress and may result in increased exposure to disease pathogens including salmonella.” When the Governor signed the bill he extolled its benefits for “California egg producers and animal welfare” but said nothing about its supposed health and safety benefits.   
    Enter a handful of states who have joined the Missouri Attorney General in a federal suit contending that the ban on the sale of eggs not produced under California’s standards is an unconstitutional interference with interstate commerce.  California produces about 6% of the nation’s eggs but consumes over 12%.  Over 40% of California’s egg supply comes from out-of-state.  Missouri only exports a third of its annual egg production, or some 670 million eggs, to California. 
    The plaintiffs have three good arguments.  First, while AB1437 does not openly discriminate against out-of-state egg producers, it bears the smell of economic protectionism, an illegitimate objective.  AB1437's purpose was to protect California egg producers from the lower prices that foreign producers could offer due to their battery cage production methods. But after the legislature realized that protectionism is illegitimate it claimed that AB1437 was just to protect consumers from salmonella, even though the scientific evidence that salmonella is promoted by battery cages is weak at best.  AB1437 resembles the North Carolina regulation at issue in Hunt v. Washington State Apple Advertising Commission, which that barred the use of Washington State apple grades on shipping containers sent into North Carolina.  The Supreme Court rejected the state’s contention that the law prevented consumer deception.  It did almost nothing to achieve that goal because consumers almost never see the shipping containers.  The Court required North Carolina to prove that it had no less discriminatory alternative available, but there were many less discriminatory alternatives.  Here, due to an evident discriminatory purpose California must prove that it had no alternative but AB1437 to protect egg consumers from salmonella.  I am no expert on detection of salmonella in eggs, but given the skimpy scientific evidence linking close confinement of hens to salmonella in eggs I doubt that California can make that showing. 
    Second, even if AB1437 is construed as non-discriminatory and the plaintiffs are forced to prove that AB1437's burden on interstate commerce is “clearly excessive” in relation to the “putative local benefits” of the law, they have a good case.  The legitimate local benefit is reduction of salmonella infections, and there is paltry evidence that cage size has much, if any, effect on the incidence of salmonella.  Not much benefit there.  On the other hand, the impact on out-of-state egg producers is enormous.  Californians consume about 5.5 billion eggs from out-of-state sources each year.  The cost of restructuring egg production methods in those states is astronomical.  As in prior cases, when the economic impact on interstate commerce dwarfs the local benefits the burden on interstate commerce is plainly excessive and the law should be voided. 
    Finally, while ethical and humane treatment of laying hens is a legitimate, even important, state interest, this argument is in essence an argument that California has the right to impose its regulatory regime on out-of-state producers. Extraterritorial regulation can take several forms. Massachusetts required beer wholesalers to affirm monthly that the price of its beer in Massachusetts was no higher than the price of its beer in neighboring states, which effectively regulated beer prices in those other states. In Healy v. Beer Institute the Supreme Court said this was impermissible extraterritorial regulation. The Healy principle is portable: When compliance with a state regulation necessarily requires extraterritorial compliance with that regulation, the state has exceeded its authority.  In the absence of federal law on the subject, California could ban the sale of all eggs, because that would require no extraterritorial compliance.  But California chose to ban the sale of only those eggs produced in non-conformity with California regulations and thus sought to extend its regulations beyond its borders.  It matters not that foreign egg producers are free to stop selling eggs in California; Massachusetts beer wholesalers could have ceased selling beer in Massachusetts or neighboring states. 
    If California wants a regulatory solution, it should ask Congress to authorize it to regulate interstate commerce, or require all egg producers to use roomier cages.  As for me, I will continue to buy free range eggs.  After all, there is also a market solution.

Comments

[RJ]

By your logic, if a state "consumes" more health care than it produces (i.e., but having state residents treated by out-of-state providers more than the residents treated in-state), would that also imply that the commerce clause is implicated? If so, did the majority get it wrong in the Health Care cases, at least for some state (such as New Jersey, which relies heavily on NY and PA)?

Second, the hundreds of millions of eggs that were recalled a few years ago were done so because the eggs were harvested in conditions where about 4-8 feet of chicken manure was under the hens. If that doesn't produce a breeding ground for salmonella, I'm not sure what would.

As a third matter, since Congress has not acted, isn't this something that the States can regulate?

And fourth, do you know what "free range" actually means? To help you out, it does NOT mean that the chickens that produce your eggs actually left a controlled environment and had a breath of fresh air.

[Calvin Massey]

RJ:
1)There isn't any state law (of which I am aware) that would be an obstacle to interstate commerce in health care of the sort you posit, so the DCC is not an issue.
2)I'm sure that 4-8 feet of manure under the cages promotes all sorts of disease, but the California law doesn't address anything that goes on outside of the cages. It only addresses the cages. I suppose disease would be just as likely if there were 4 to 8 feet of manure under the California mandated cages. In any case, though not at issue in the current litigation, I don't think anybody with good sense would condone the conditions you describe.
3) Because Congress has not acted, the commerce clause in its negative, or dormant, phase operates to void state regulations that discriminate against interstate commerce without adequate justification and state regulations that have a more than incidental impact on interstate commerce and that impose burdens on IC that are clearly excessive in relation to the local benefits.
4)I have no idea what free range may mean in practice, but the term implies considerable freedom of movement for the hens. If it means that they are treated no differently than hens in battery cages it is false and misleading advertising.

[Michael Teter]

I thought states were supposed to be the laboratories of democracy, especially for those lovers of federalism. In any event, your dormant commerce clause analysis does not convince me.

First, the text of the law provides a non-protectionist, scientifically supported explanation for the law. When the law itself (which is, of course, the only part voted on my the entire legislature, as textualists in other circumstances would remind us) provides a neutral, non-discriminatory explanation, the courts are remiss to look further (see MN v. Clover Leaf Creamery).

Second, once we get to the Pike balancing test for non-discriminatory laws, it is very difficult for the party challenging a statute to show that the burdens on interstate commerce are "clearly excessive" to the putative local benefits. You may disagree with that the local benefits are significant, but, as RJ states above, that's a contested point. Further, you have demonstrated no evidence of any burden on interstate commerce. How difficult is it for egg producers to comply? Will it close the California market to egg producers? Doubtful. Absent very clear evidence of some real restraint on commerce, the Pike balancing favors the state (see United Haulers v. Oneida).

Finally, the extraterritoriality claim is nonsense. Unlike the (very few) cases in which a court has struck down a statute as extraterritorial, California's law is not mandating out-of-state compliance. It prevents only those who seek to enter the California market from doing so with eggs not produced in the required manner. In other words, the only thing being regulated are eggs sold in the state. An out-of-state farmer (or, more realistically, an out-of-state conglomerate) could continue to produce eggs in the same manner and sell those to the rest of the country, and have a special coop for eggs going to California. Maybe that will increase expenses, but that is not the standard for determining extraterritoriality, as I'm sure you know. Moreover, if your understanding of extraterritoriality were accurate, how do you explain the constitutionality of Proposition 65, requiring labeling on all California products containing known carcinogens?

[Greg Sergienko]

This is a small piece of a much bigger problem, domestic attempts to regulate processes that happen in other states or in international areas by restricting what can be sold. I no longer teach in the area, so I'm not really up on it, but one obvious parallel in international trade law arising from US attempts to ensure that tuna sold in the US was caught in dolphin-friendly ways or at least to advise consumers about the ways in which tuna was caught. Labelling of goods containing GMO is likely to be another example. So is liability for watching child pornography, if it applies regardless of whether making the pornography was legal in the place where it was made.

Although the international decisions have not been friendly to those so attempting to regulate, it's not obvious to me that Calvin's suggested solution to the conflict is the right one, either under international trade law or under the dormant commerce clause. The Supreme Court's balancing language is suited for measuring economic issues, but I don't think it does justice to the moral dimension. Chickens might seem like a really different case from tuna, but suffering is suffering,

[Kurt Lash]

Were there no evidence of protectionism, I might agree with Michael. Here, there seems to be rather obvious protectionism in play and that has significant "pull" in DCC cases, regardless of statutory text (see Kassel). In this kind of case, the Court will be open to "the burdens clearly outweigh the benefits" arguments.

[Michael Teter]

I certainly agree that the evidence of protectionism might make this a closer case, but hardly as clear cut as Calvin and Kurt suggest.

First, courts have looked past protectionist intentions, if the law itself serves points to non-protectionist motivations (again, see Clover Leaf, but also Exxon).

More importantly, claiming protectionism is this context is a much more difficult sell for the plaintiffs than this post suggests. The protectionist claim is that California egg producers want out-of-staters to comply with the same requirements that they must abide by. That's a very odd assertion of protectionist interests. "We should be protected from abiding by the same standards as California producers!" Who's asserting a protectionist interest?

Finally, no one is suggesting that the first law was enacted with protectionist aims -- indeed, it clearly was not. Instead, health and safety and animal welfare are the obvious objectives. Somehow, though, this aim is supposed to be irrelevant in assessing the purposes of the second law, which seeks to apply that first law to a larger group of people? As Calvin says, Californians consume 5.5 billion eggs produced from out of state each year. To meet the admittedly legitimate health and safety objectives of the first law, California needed to expand its application to all eggs coming in from out of state.

[Michael Herz]

I don't know the background; it could be that the smell of protectionism is strong. But on its face, this seems a lot like the California law prohibiting the sale of foie gras made by force-feeding ducks, which the 9th Circuit upheld in Association des Eleveurs de Canards et d'Oies du Quebec v. Harris, 729 F.3d 937 (9th Cir. 2013).