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Legal Memorandum #123 on Legal Issues

May 22, 2014

California Shell Egg Regulations Run Afoul of the Commerce Clause

By

Abstract

In 2008, California voters passed Proposition 2, which imposes caging standards on California egg producers. Since then, the California legislature and California regulators have tried to “level the playing field” by imposing the same requirements on out-of-state egg producers. Yet federal law explicitly prohibits one state from imposing its standards on eggs produced in other states. Furthermore, the California law and regulations appear to violate the Commerce Clause of the U.S. Constitution. If it chooses to do so, California can continue to enforce Proposition 2 against in-state egg producers and accept any negative economic consequences suffered by its local industry, but it cannot enforce the standards against producers in other states.

In 2008, California voters passed Proposition 2, which prohibits the confinement of certain farm animals in certain ways.[1] This law, which will enter into effect on January 1, 2015, will place California shell egg producers at a competitive disadvantage against out-of-state shell egg producers: To comply with Proposition 2, for example, California producers will need to spend more money to provide more space to their hens.[2]

To implement this legislation without killing local California jobs, in 2010, the California legislature passed AB 1437, which requires egg farmers in other states to comply with caging standards identical to those in Proposition 2.[3] In 2013, the California Department of Food and Agriculture passed implementing regulations prohibiting someone from entering into a contract to buy or sell eggs in California if they are “the product of an egg-laying hen that was confined in an enclosure that fails” to provide a minimum space for the hens.[4]

The Lawsuit

On February 3, 2014, the Attorney General of Missouri sued the State of California in federal district court, arguing that the California law, which attempts to regulate Missouri chicken egg production, violates the Commerce Clause of the Constitution and is preempted by federal law.[5] Since then, five other states have joined the lawsuit: Alabama, Iowa, Oklahoma, Kentucky, and Nebraska.

While one might question the wisdom of these food regulations, under the U.S. constitutional system, Californians are allowed to regulate their state largely as they see fit. State laws need not be sensible to pass constitutional muster. However, California cannot unduly burden interstate commerce or violate existing federal law.

The Commerce Clause, contained in Article I, Section 8 of the Constitution, grants Congress the power to regulate commerce “among the several states.”[6] Further, the Supremacy Clause dictates that the “Constitution, and the Laws of the United States … shall be the supreme Law of the Land.…”[7] In other words, where the federal government has enacted a valid law and that law conflicts with state law, the federal law preempts, or invalidates, the state law.[8]

Here, Congress has already passed a law that specifically preempts the substance of the California scheme, and there is no doubt that the federal law is valid. Federal law prohibits states from, among other things, requiring that eggs shipped in interstate or foreign commerce meet “standards of quality, condition, weight, quantity, or grade which are in addition to or different from the official Federal standards.”[9] In other words, while California can create new standards for California eggs, federal law prohibits California from creating new standards for Missouri eggs.

California might argue that its standards have nothing to do with egg “quality,” but that argument would be problematic because it would be a public relations blow to the animal rights lobby, which often argues that increased farm regulation means better-quality products. Critically, this argument would also weaken California’s legal defense to the Commerce Clause challenge by admitting that California has no valid health reason for regulating conduct occurring entirely in Missouri.

Commerce Clause Analysis

Even if no federal law expressly prohibited California from discriminating against Missouri eggs, the California law would still likely run afoul of the Constitution. Although criticized by Justices Antonin Scalia and Clarence Thomas, among others,[10] a legal doctrine known as the dormant Commerce Clause has long been recognized by the U.S. Supreme Court.[11] This doctrine holds that the grant of power to Congress in the Commerce Clause implies a restriction that prohibits states from passing legislation that would improperly burden or discriminate against others attempting to engage in interstate commerce, even if Congress has not expressly prohibited a state from passing such legislation.

When analyzing whether a law violates the dormant Commerce Clause, courts apply a two-step analysis. First, a court asks whether the state law in question discriminates against out-of-state actors attempting to engage in interstate commerce or has the effect of favoring in-state economic interests, in which case that state law is subject to strict scrutiny and is “virtually per se invalid.”[12] The fundamental question is whether a law “is basically a protectionist measure, or whether it can fairly be viewed as a law directed to legitimate local concerns, with effects upon interstate commerce that are only incidental.”[13] Yet even where a state is not intending to discriminate against out-of-state actors and is applying the law even-handedly, the law might still be struck down under the second prong of the dormant Commerce Clause analysis if it imposes a burden on interstate commerce that is “clearly excessive in relation to the putative local benefits.”[14]

Federal courts do not take states at their word as to a law’s purpose or effect, and the California law does not appear to advance a legitimate local purpose, such as safeguarding the health, safety, or morals of Californians. California’s law at best appears to address the health and safety of the egg-laying hens, not the egg-consuming public.[15] Further, as noted above, in this case, Congress has enacted legislation using its Commerce Clause power that expressly preempts state law with respect to attempts to regulate the quality of out-of-state eggs that are shipped interstate.

Whether viewed as a question of express preemption by federal law or as a question of violating the dormant Commerce Clause, the California scheme should fall. The legislature was clear when it passed AB 1437: “The intent of this legislation is to level the playing field so that in-state producers are not disadvantaged.”[16] A clearer statement of discriminatory intent could not be imagined. After all, it is “leveling the playing field” to saddle a 90-pound horse with 10 extra pounds in a race with a 100-pound horse, but the purpose and effect of the “leveling” are to disadvantage only one horse.

Yet even in the absence of such intentional discrimination against out-of-state egg producers who wish to engage in interstate commerce, AB 1437 places an excessive burden on Missouri egg production in exchange for a purely symbolic public purpose. It cannot be plausibly argued that prohibiting the importation of certain eggs would help to improve the morality of Californians. Until litigation commenced, the State of California made no claim that AB 1437 served any legitimate local purpose.

The regulation of Missouri shell egg production is an entirely illegitimate goal for the State of California; one state cannot regulate the internal affairs of another state. Clearly, California’s sole interest in enforcing AB 1437 is to place a burden on Missouri shell egg production in order to protect the California egg-producing industry. In the absence of any conceivable legitimate state interest, the size of the impact on Missouri’s exports to California (and those of the other states that have since intervened in the suit) need not even be addressed. However, as the California Department of Food and Agriculture itself has admitted, “given the lack of specificity as to the confinement limitations, it will invariably be hard to ascribe any particular public health risk for failure to comply.”[17]

In other words, even if one believes there is some health benefit to AB 1437, it is impossible to quantify, and the burden on interstate commerce, by definition, would therefore be “clearly excessive in relation to the putative local benefits.”

Conclusion

Ultimately, if the State of California is serious about animal welfare and really believes that “roomier henhouses” are important, it can enforce Proposition 2 against in-state egg producers and accept any negative economic consequences suffered by its local industry. Those eggs will undoubtedly be more expensive, but big-hearted California consumers may choose to stomach the price hike and buy from in-state producers.

However, raising the price of other states’ eggs is likely unconstitutional. If AB 1437 is struck down in federal court, as it should be, we will find out whether the California egg industry cracks.

—Andrew Kloster is a Legal Fellow in the Edwin Meese III Center for Legal and Judicial Studies at The Heritage Foundation.

Show references in this report

[1] Cal. Health & Safety Code § 25990 (2008).

[2] Daniel A. Sumner et al., Univ. of Cal. Agric. Issue Center, Econ. Effects of Proposed Restrictions on Egg-Laying Hen Housing in Cal. (2008).

[3] Assembly Bill 1437 (2010), codified at Cal. Health & Safety Code § 25995–25997.1 (2008).

[4] Cal. Code Regs. tit. 3, § 1350 (2013).

[5] Complaint, Koster v. Harris, 14-CV-00341 (N.D. Cal. Feb. 3, 2014), available at http://docs.burningbird.net/cases/eggs/document2.pdf.

[6] U.S. Const. art. 1, § 8.

[7] U.S. Const. art. 6, cl. 2.

[8] Defining precisely when a federal law conflicts with a state law is a thorny problem that is not addressed here.

[9] 21 U.S.C. § 1052(b).

[10] See, e.g., United Haulers Ass’n v. Oneida-Herkimer Solid Waste Mgmt., 550 U.S. 330, 348 (2007) (Scalia, J., concurring in part) (“the so-called ‘negative’ Commerce Clause is an unjustified judicial invention….”). See also United Haulers, 550 U.S. at 349 (Thomas, J., concurring in the judgment) (“The negative Commerce Clause has no basis in the Constitution and has proved unworkable in practice.”).

[11] The term “dormant” comes from a statement of Chief Justice John Marshall in Gibbons v. Ogden, 22 U.S. 1 (1824) (the regulation of interstate commerce is a power that “must be placed in the hands of agents or lie dormant”).

[12] See, e.g., City of Philadelphia v. New Jersey, 437 U.S. 617 (1978).

[13] Id. What constitutes a “legitimate local concern” is not entirely clear, but it is related to the concept of state “police powers”—that is, the list of residual powers that states have retained since the Founding. States historically have passed laws to secure the “health, safety, and morals” of the public.

[14] Pike v. Bruce Church, Inc., 397 U.S. 137 (1970).

[15] The public health justifications appear to have been advanced as a litigation stance: a post hoc rationalization.

[16] Bill Analysis of the California Assembly Committee on Appropriations, May 13, 2009.

[17] Complaint, supra note 5, at 10–11 (citing California Department of Food and Agriculture Enrolled Bill Report).

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