On October 21, 2019, we blogged about the constitutional challenge to California’s Proposition 12, which prohibits the sale in California of eggs, pork or veal produced by animals not raised in accordance with California animal protection rights. As we explained, plaintiffs have moved for a preliminary injunction.

The State has filed its opposition along with amicus support from the Association of California Egg Farmers. The State’s first argument is that plaintiff lacks associational standing because the complaint did not identify by name any of the Association’s members who had allegedly suffered injury. This strikes us as a hyper-technical argument easily remedied by an amended pleading. The State apparently agrees because it devotes less than a page to the argument.

The State responds to the Institute’s first argument by insisting that the proposition does not discriminate at all against out-of-state producers. Rather, it treats in-state and out-of-state producers identically:  all have to provide living space for their animals.  To the extent that this denies out-of-state producers a competitive advantage, it is not one they have earned by their own efforts. Indeed, if the plaintiff prevailed on this issue, it would produce a rule requiring the State to discriminate against in-state producers, an odd result indeed.

The stated purpose of the proposition was to prevent cruelty to animals and avoid food-borne illness. The Institute’s argument that the stated purpose was to protect California farmers from competition dealt only with the original egg statute, and not proposition 12.

Both the State and its amicus rely heavily on the Ninth Circuit’s ruling sustaining California’s ban on foie gras produced in the traditional manner, about which we last blogged on December 27, 2018. Because that laws banned in-state and out-of-state production alike, it did not discriminate against interstate commerce.

On the second issue, California’s attempt to exercise extra-territorial jurisdiction over the activities of out-of-state producers, both the State and its amicus argue that the proposition merely regulates transactions occurring within California. A true extraterritorial law seeks to regulate transactions outside the state. A law limited to in-state transactions may have out-of-state consequences but that does not mean it is extra-territorial in violation of the Constitution.

Both the State and its amicus rely on the foie gras case. California’s ban on traditionally produced foie gras certainly affected conduct outside the State, but it only regulated transactions within California. If a California restauranteur wanted to open an outlet in Nevada, and purchase foie gras and serve it in Nevada, nothing in the statute prohibited that.

On the third issue, Pike balancing, the State argues that the mere imposition of costs on out-of-states businesses does not constitute a burden so long as the activity does not require a uniform national standard. In any event, California does have a legitimate interest in preventing animal cruelty, even in other states. The Ninth Circuit so held in the foie gras case.

On November 22, 2019, just four days after oral argument, the Court denied the motion for preliminary injunction on the basis that plaintiff was unlikely to prevail on the merits. The Court held that plaintiff had associational standing to sue but its arguments had little chance of success.

With respect to the first argument, the Court held that plaintiff had presented no evidence that the purpose of Proposition 12 was to discriminate against out-of-state producers. Nor was the effect of the proposition to discriminate, as it treats both in-state and out-of-state identically: both must comply with its animal welfare requirements. The Court agreed that the foie gras case foreclosed this argument. The proposition’s application does not depend on where the conduct took place but on what it was.

On extraterritorial regulation, the Court held that plaintiff’s cases were confined to price-fixing, not animal welfare. Even if those cases applied, the proposition directly regulates only conduct occurring in California: the sale of animal products in that state. It is irrelevant that this purely in-state regulation has substantial out-of-state effects.

On the Pike balancing test, the Court held that it only applied to transactions involving activities that required uniform national standards, such as interstate transportation or sports. The mere imposition of costs – even substantial costs – does not constitute the burden on interstate commerce that Pike requires.

On balance, we believe that the State has much the better of the argument. The best hope for the plaintiff may be congressional action to require uniform national standards. Given the claims of animal cruelty, that may be a tough political battle.