In 2008, California voters approved Proposition 2, which banned the sale of eggs in California unless the laying hens had a minimum amount of space in which to lay their eggs. Regulations that became effective January 1, 2015, required a minimum of 116 square inches for each hen, approximately twice the space that was standard in the industry. California egg producers generally complied with the regulations by reducing the number of hens in each cage rather than building expensive new cages. Since their fixed costs remained the same, the net result was a substantial increase in the unit cost per egg.
In 2010, under pressure from California egg growers, the legislature enacted a statute applying Proposition 2 to all eggs sold in the State of California, regardless of where they were laid. Thus, if a Missouri egg grower wanted to sell into the California market, it would have to comply with the minimum cage size requirement. It could do so either by doubling the number of cages or accepting a 50% reduction in egg production. Either alternative would impose substantial financial costs on the grower.
The California legislature attempted to justify the statute on the ground that larger cages meant less stress on the hens, thus reducing the likelihood of salmonella infection. It had to acknowledge, however, that there is little scientific evidence supporting a link between stress and salmonella. Other parts of the legislative history suggested that the real purpose of the statute was to avoid placing California egg growers at a competitive disadvantage.
About one third of the eggs laid in Missouri are sold in California, making up about 13% of the latter state’s total consumption. Fluctuations in supply and demand during the course of the year make it impossible for growers to set up one operation for California and another operation for everywhere else. Missouri growers therefore had a choice: become California compliant by incurring considerable costs which would make their eggs uncompetitive elsewhere; or abandon the California market.
In March 2014, the State of Missouri filed a suit to enjoin the operation of the California regulations as they related to Missouri growers. Five other states soon joined the lawsuit. The principal ground for the lawsuit was that application of the regulations discriminated in favor of California growers at the expense of out-of-state growers, one of the primary reasons for the Commerce Clause’s existence. Alternatively, to the extent that the regulations rested on alleged safety concerns, the federal Egg Products Inspection Act preempted them.
The District Court dismissed the case and the court of appeals for the 9th circuit affirmed. Neither opinion discussed the merits. Both held that the states lacked standing – i.e., a concrete, personal injury that the requested injunction would redress.
The states argued that they had parens patriae standing – i.e., they had a quasi-sovereign interest in protecting the interests of their citizens. The local egg growers, they argued, certainly had the requisite concrete injury and the states had authority to seek to redress it on their behalf.
The Ninth Circuit did not agree. Parens patriae standing requires that the State articulate an interest separate and apart from the interests of its citizens, although their health and economic welfare are usually sufficient. Missouri made three arguments in an effort to satisfy that requirement, none of which the Ninth Circuit found persuasive.
First, Missouri alleged that its egg farmers suffered injury. The Ninth Circuit held that such injury, by itself, did not confer parens patriae standing because the egg farmers were fully capable of filing their own lawsuits and thereby obtaining complete relief.
Second, Missouri claimed that fluctuations in the price of eggs would harm consumers other than egg farmers. The Ninth Circuit rejected this theory on the ground that it was pure speculation, as the statute had not taken effect when Missouri filed its lawsuit. Moreover, to the extent that the statute caused the price of eggs to decline in Missouri, the effect would be beneficial to consumers, not detrimental.
Finally, Missouri alleged that it had parens patriae standing to prevent discrimination against Missouri egg farmers. The Ninth Circuit responded that there was no discrimination: the statute treated California egg farmers identically with all other egg farmers.
Missouri has filed a petition for certiorari with the United States Supreme Court. If the petition is unsuccessful we can expect some of the major egg farmers in the state to launch their own attacks on the statute.