throbber

`
`
`
`
`
`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 1 of 49
`
`No. 20-55631
`
`IN THE UNITED STATES COURT OF APPEALS
`FOR THE NINTH CIRCUIT
`
`NATIONAL PORK PRODUCERS COUNCIL & AMERICAN FARM
`BUREAU FEDERATION,
`Plaintiffs-Appellants,
`
`v.
`
`KAREN ROSS, et al.,
`Defendants-Appellees,
`&
`ANIMAL LEGAL DEFENSE FUND, et al.,
`Intervenors-Defendants-Appellees.
`
`On Appeal from a Judgment of the United States District Court for
`the Southern District of California,
`No. 3:19-cv-02324-W-AHG (Hon. Thomas J. Whelan)
`
`
`Dan Himmelfarb
`Colleen M. Campbell
`MAYER BROWN LLP
`1999 K Street, NW
`Washington, DC 20006
`Telephone: (202) 263-3000
`Facsimile: (202) 263-3300
`dhimmelfarb@mayerbrown.com
`
`
`PLAINTIFFS-APPELLANTS’ REPLY BRIEF
`
`Timothy S. Bishop
`Brett E. Legner
`MAYER BROWN LLP
`71 S. Wacker Drive
`Chicago, IL 60606
`Telephone: (312) 782-0600
`Facsimile: (312) 701-7711
`tbishop@mayerbrown.com
`
`Attorneys for Plaintiffs-Appellants
`Additional Attorneys for Plaintiffs-Appellants
`Listed on Signature Page
`
`
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 2 of 49
`
`TABLE OF CONTENTS
`
`
`Page
`
`
`TABLE OF AUTHORITIES ................................................................. ii
`INTRODUCTION ................................................................................. 1
`ARGUMENT ......................................................................................... 7
`I.
`Plaintiffs Have Adequately Alleged That Proposition
`12 Is An Impermissible Extraterritorial Regulation. ........ 7
`A. Proposition 12 regulates wholly out-of-state
`conduct. ...................................................................... 8
`B. Proposition 12 regulates extraterritorially
`because it impermissibly intrudes into the
`operations of out-of-state businesses. ..................... 28
`C. Proposition 12 subjects pork producers to
`inconsistent regulations. ......................................... 32
`II. Plaintiffs Have Adequately Alleged That Proposition
`12 Imposes An Excessive Burden On Interstate
`Commerce In Relation To Its Putative Local
`Benefits. ............................................................................ 34
`A. Proposition 12 substantially burdens interstate
`commerce. ................................................................ 34
`B. Proposition 12’s burden on interstate commerce
`far exceeds its illusory local benefits ...................... 40
`CONCLUSION ................................................................................... 43
`
`
`
`
`i
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 3 of 49
`
`
`
`Cases
`
`TABLE OF AUTHORITIES
`
` Page(s)
`
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) ........................................................................... 2
`
`Association des Eleveurs de Canards et d’Oies du Quebec v.
`Harris,
`729 F.3d 937 (9th Cir. 2013) ..................................................... 24, 40
`
`
`
`Baldwin v. G.A.F. Seelig, Inc.,
`294 U.S. 511 (1935) ......................................................................... 16
`
`Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth.,
`476 U.S. 573 (1986) ................................................................... 13, 17
`
`C & A Carbone, Inc. v. Town of Clarkstown,
`511 U.S. 383 (1994) ......................................................................... 41
`
`Chinatown Neighborhood Ass’n v. Harris,
`794 F.3d 1136 (9th Cir. 2015) ................................................... 23, 24
`
`Daniels Sharpsmart, Inc. v. Smith,
`889 F.3d 608 (9th Cir. 2018) ..................................................... 11, 13
`
`Exxon Corp. v. Governor of Maryland,
`437 U.S. 117 (1978) ......................................................................... 18
`
`Greater Los Angeles Agency on Deafness, Inc. v. Cable
`News Network, Inc.,
`742 F.3d 414 (9th Cir. 2014) ..................................................... 25, 27
`
`Harris v. Cnty. of Orange,
`682 F.3d 1126 (9th Cir. 2012) ........................................................... 3
`
`Healy v. Beer Inst.,
`491 U.S. 324 (1989) .................................................................. passim
`
`
`
`ii
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 4 of 49
`
`
`
`Herrera v. Zumiez,
`953 F.3d 1063 (9th Cir. 2020) ........................................................... 8
`
`Jacobson v. AEG Capital Corp.,
`50 F.3d 1493 (9th Cir. 1995) ....................................................... 8, 11
`
`Kassel v. Consol. Freightways Corp. of Del.,
`450 U.S. 662 (1981) ................................................................... 35, 42
`
`Legato Vapors, LLC v. Cook,
`847 F.3d 825 (7th Cir. 2017) ..................................................... 28, 30
`
`National Ass’n of Optometrists & Opticians v. Harris,
`682 F.3d 1144 (9th Cir. 2012) ......................................................... 18
`
`NCAA v. Miller,
`10 F.3d 633 (9th Cir. 1993) ....................................................... 11, 20
`
`N. Am. Meat Inst. v. Becerra, 420 F. Supp. 3d 1014 (C.D.
`Cal. Nov. 22, 2019) ........................................................................... 4
`
`N. Am. Meat Inst. v. Becerra,
`825 Fed. App’x 518 (9th Cir. 2020) .................................................. 4
`
`Pac. Merch. Shipping Ass’n v. Goldstene,
`639 F.3d 1154 (9th Cir. 2011) ......................................................... 34
`
`Pac. Nw. Venison Producers v. Smitch,
`20 F.3d 1008 (9th Cir. 1994) ........................................................... 34
`
`Pharm. Rsch. and Mfrs. of Am. v. Walsh,
`538 U.S. 644 (2003) ................................................................... 15, 16
`
`Pike v. Bruce Church, Inc.,
`397 U.S. 137 (1970) ......................................................... 1, 34, 40, 41
`
`Rocky Mountain Farmers Union v. Corey,
`730 F.3d 1070 (9th Cir. 2013) ......................................................... 17
`
`Rocky Mountain Farmers Union v. Corey,
`913 F.3d 940 (9th Cir. 2019) ........................................................... 17
`
`
`
`iii
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 5 of 49
`
`
`
`Rosenblatt v. City of Santa Monica,
`940 F.3d 439 (9th 2019) ............................................................ 36, 37
`
`S.D. Myers, Inc. v. City & Cnty. of S.F.,
`253 F.3d 461 (9th Cir. 2001) ........................................................... 34
`
`Statutes
`
`Ind. Code § 16-44-2-8(b) ...................................................................... 32
`
`Ind. Code § 16-44-2-11(a) .................................................................... 32
`
`Mont. Code Ann. § 80-5-403 ................................................................ 31
`
`Other Authorities
`
`Andrew S. Bowman et al., Influenza A (H3N2) Virus in
`Swine at Agricultural Fairs and Transmission to
`Humans, 23(9) Emerging Infectious Diseases 1551
`(2017) ............................................................................................... 40
`
`Hormel Foods, Annual Report (Form 10-K) (Oct 25, 2020),
`http://d18rn0p25nwr6d.cloudfront.net/CIK-
`0000048465/049e9679-5c2b-48fc-a67f-945fdc05db1f.pdf ............... 11
`
`Ohio Admin. Code 901:12-8-02(G)(4) .................................................. 33
`
`Ohio Admin. Code 901:12-8-02(G)(5) .................................................. 33
`
`
`
`iv
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 6 of 49
`
`
`
`INTRODUCTION
`
`Plaintiffs’ 470-paragraph complaint plausibly alleges that
`
`Proposition 12 regulates wholly out-of-state commerce and also fails
`
`the Pike balancing test. Amici the United States and its Department
`
`of Agriculture, 20 States that produce most of the Nation’s pork, and
`
`the largest business trade groups in the country agree that these
`
`claims should not have been dismissed and that Proposition 12
`
`violates the dormant Commerce Clause.
`
`The Supreme Court has repeatedly directed that the focus must
`
`be on the law’s practical effect, and Proposition 12’s extraterritorial
`
`effects on commerce are serious. Essentially all—99.8%—of the pork
`
`Californians consume is imported from out of state. Hundreds of
`
`thousands of out-of-state pigs are needed to supply that pork every
`
`year. And every pig from which any cut of pork reaches California
`
`necessarily bears Proposition 12’s substantial costs, meaning that
`
`farmers and consumers everywhere pay for California’s preferred
`
`animal-housing methods. In addition, because segregation and
`
`tracing throughout the complex pork-production chain is not possible,
`
`even pigs whose meat is sold entirely outside California will have to
`
`come from Proposition 12-compliant facilities and will carry those
`
`
`
`1
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 7 of 49
`
`
`
`same costs. Inevitably, the per-pig costs of complying with Proposition
`
`12 are borne by the suppliers and consumers of pork sold nationwide.
`
`Although the complaint lays out these facts, Defendants largely
`
`ignore them, pretending that Plaintiffs allege only that farmers will
`
`have to pay to alter their sow facilities if meat from their pigs is sold
`
`into California. The blow to out-of-state farmers will be severe, with
`
`some certainly going out of business, but Plaintiffs allege more: that
`
`the costs those farmers bear apply to huge quantities of pork sold
`
`outside California, will reduce the supply of pork in interstate
`
`commerce, and will increase pork prices nationwide.
`
`Plaintiffs also allege that these significant burdens on interstate
`
`commerce vastly outweigh Proposition 12’s minimal “benefit” to sow
`
`welfare (the only benefit California asserts). Hardly any sows are
`
`commercially farmed in California, so any welfare effects of the law—
`
`which are illusory anyway, because the law harms rather than helps
`
`sows—are felt almost entirely out-of-state.
`
`The legal standards that apply at this preliminary stage of the
`
`litigation are clear. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (to
`
`survive dismissal, a complaint need contain only “sufficient factual
`
`
`
`2
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 8 of 49
`
`
`
`matter … to ‘state a claim to relief that is plausible on its face’”)
`
`(citation omitted); Harris v. Cnty. of Orange, 682 F.3d 1126, 1131 (9th
`
`Cir. 2012) (Rule 12(b)(6) and 12(c) motions should be denied when the
`
`complaint pleads sufficient facts to draw a reasonable inference of a
`
`claim). Plaintiffs and amici have shown that the complaint easily
`
`satisfies those requirements and should not have been dismissed. Yet
`
`despite these standards, Defendants—in particular intervenors
`
`Humane Society of the United States, Animal Legal Defense Fund,
`
`and others (collectively, “HSUS”)—insist on referring to “facts”
`
`outside the four corners of the complaint. Those irrelevant or
`
`disputed “facts” would be an appropriate matter for inquiry on the
`
`merits but have no place at the pleading stage.
`
`Plaintiffs explain below why Defendants have not rebutted their
`
`showing that the district court’s ruling should be reversed and
`
`Plaintiffs given the opportunity to address the merits. Plaintiffs
`
`explain in particular that none of the case law on which Defendants
`
`rely supports dismissal here. To begin with, however, an observation
`
`about the way Defendants seek to characterize this case and the
`
`Plaintiffs is necessary.
`
`
`
`3
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 9 of 49
`
`
`
`Throughout their briefs, the Defendants try to lump the
`
`Plaintiffs here in with the plaintiffs and claims in North American
`
`Meat Institute v. Becerra, 420 F. Supp. 3d 1014 (C.D. Cal. Nov. 22,
`
`2019) (“NAMI”), in which this Court recently affirmed the denial of a
`
`motion to preliminarily enjoin Proposition 12. N. Am. Meat Inst. v.
`
`Becerra, 825 Fed. App’x 518 (9th Cir. 2020), rhg. denied (Dec. 23,
`
`2020). But NAMI was a challenge to Proposition 12 in its entirety and
`
`not, as here, solely its provisions addressing pork. It arose at the
`
`preliminary-injunction stage, where the legal standards are entirely
`
`different. And the plaintiff organization there (“NAMI”) did not plead
`
`a key basis of Plaintiffs’ claims here, which is that Proposition 12
`
`imposes costs on every cut of pork from every pig, most of which will
`
`never be sold in California.1
`
`This Court’s decision in NAMI is a two-page, unpublished, non-
`
`precedential memorandum. And this Court’s holding was that the
`
`district court “did not abuse its discretion” in ruling that, based on
`
`
`1
`NAMI subsequently amended its complaint to reflect this point,
`but not at the preliminary-injunction stage. See First Amended
`Complaint ¶¶73-75, NAMI v. Becerra, 2:19-cv-08569 (C.D. Cal. Mar.
`9, 2020) (Dkt. 73).
`
`
`
`
`4
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 10 of 49
`
`
`
`the preliminary-injunction record, the plaintiff was “unlikely to
`
`succeed on the merits.” The issue here is whether, on de novo review,
`
`the allegations in the Plaintiffs’ complaint state a claim for relief.
`
`In addition, NAMI represents primarily packers, which are
`
`slaughterhouse operators who purchase market hogs from farmers
`
`and then process them into cuts of meat that are sold to retail.
`
`Plaintiffs here, the National Pork Producers Council and American
`
`Farm Bureau Federation, mainly represent the farmers who operate
`
`sow farms. It is Plaintiffs’ member farmers who will bear the costs of
`
`retrofitting or building new Proposition 12-compliant farms and
`
`implementing Proposition 12-compliant farming methods; whose sows
`
`and workers will be endangered by the law’s requirements; whose
`
`herd sizes will be reduced as a practical result of the law; and who are
`
`being told by packers that, because of the impossibility of tracing and
`
`segregating California-bound pork, all of their sows must be
`
`Proposition 12-compliant. It is the reduction of these farmers’
`
`productivity—from the increased space-per-sow requirement, the
`
`increased sow mortality that comes with it, and pregnancy losses
`
`because Proposition 12 bans the use of individual breeding stalls—
`
`
`
`5
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 11 of 49
`
`
`
`that will disrupt the national pork market, reduce the supply of pork,
`
`and drive up consumer prices.
`
`Declarant Phil Borgic, for example, an Illinois sow farmer,
`
`explained that his options under Proposition 12 are cost-prohibitive:
`
`to spend $3 million retrofitting his farm or reduce his herd size by a
`
`third, destroying his farm’s productivity and making him unable to
`
`meet his contractual commitments to deliver hogs. ER69 (¶58.b).
`
`Moving from individual stalls to group pens also would harm the
`
`welfare of his sows. Id. Greg Maher, a sow farmer in Missouri,
`
`explained that his inability to bear the construction costs and
`
`productivity losses from complying with Proposition 12 means that he
`
`may have to exit the business. ER75 (¶58.i). Maher had converted to
`
`group housing with 16 square feet per sow, using individual stalls
`
`only during breeding and gestation, but is in the process of going back
`
`to individual housing because his sow-mortality rate skyrocketed
`
`along with his production costs. Id. It is Proposition 12’s impact on
`
`farmers like these, not on the packers who make up the NAMI
`
`plaintiffs, that disrupts nationwide commerce in pork—however
`
`much California and HSUS confuse packers and the farmers who
`
`
`
`6
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 12 of 49
`
`
`
`supply them with hogs. Plaintiffs’ detailed allegations of Proposition
`
`12’s practical effect on these farmers and the nationwide pork
`
`market, including countless transactions occurring wholly outside
`
`California, more than satisfy the pleading standard.
`
`ARGUMENT
`
`I.
`
`PLAINTIFFS HAVE ADEQUATELY ALLEGED THAT
`PROPOSITION
`12
`IS
`AN
`IMPERMISSIBLE
`EXTRATERRITORIAL REGULATION.
`
`We explained in our opening brief that Proposition 12 regulates
`
`extraterritorially in three ways. First, it controls transactions that
`
`occur entirely outside California. Second, the audit and inspection
`
`procedures necessary to enforce the law require intrusive out-of-state
`
`inspections by California agents. Third, Proposition 12 threatens
`
`conflict with regulatory regimes of other states. The amicus brief
`
`submitted by Indiana and 19 other States confirms that the risk of
`
`Balkanization of the Nation’s pork market through enactment of
`
`conflicting state laws is not mere speculation. States’ Am. Br. 16-19.
`
`Because any one of these reasons, let alone the extraordinary
`
`confluence of all three, is sufficient to find that Proposition 12 is
`
`impermissibly extraterritorial, Plaintiffs have stated a claim that
`
`Proposition 12 violates the dormant Commerce Clause. If California
`
`
`
`7
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 13 of 49
`
`
`
`can condition pork sales in the state on out-of-state farmers housing
`
`sows in a particular way, it also can require that any goods sold in the
`
`State have been made by workers paid a certain minimum wage or
`
`provided with certain benefits. That is not, however, something the
`
`dormant Commerce Clause allows.
`
`A. Proposition 12
`conduct.
`
`regulates wholly out-of-state
`
`Like the district court, Defendants largely ignore the well-
`
`pleaded allegations of the complaint.2 Plaintiffs’ complaint describes
`
`the unique features of raising pigs for pork, in which a market hog
`
`typically moves through different farms at different stages of life
`
`before being processed into numerous cuts of pork destined for
`
`different markets. This complex sequence
`
`includes numerous
`
`
`2
`Even worse, throughout its brief intervenor HSUS improperly
`challenges the veracity of Plaintiffs’ well-pleaded facts, while
`advancing its own set of contrary facts, which are often based on
`nothing more than HSUS’s speculation. These new “facts”—which
`Plaintiffs would certainly dispute—may not be considered
`in
`reviewing the sufficiency of Plaintiffs’ complaint. See Herrera v.
`Zumiez, 953 F.3d 1063, 1068 (9th Cir. 2020). Indeed, submission of
`matters outside the pleadings typically requires a motion challenging
`the pleadings to be treated as a motion for summary judgment,
`Jacobson v. AEG Capital Corp., 50 F.3d 1493, 1496 (9th Cir. 1995),
`which in turn requires remand for Plaintiffs to conduct discovery.
`
`
`
`8
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 14 of 49
`
`
`
`transactions—among farmers, packing plants, and distributors—that
`
`occur entirely outside California but will nonetheless effectively be
`
`regulated by Proposition 12.
`
`Plaintiffs allege that Californians consume a large proportion of
`
`the Nation’s pork—about 13%—but that California farmers produce
`
`only a miniscule fraction of that meat. ER61 (¶¶16-20). Nearly all
`
`pork sold in California comes from pigs raised outside the State.
`
`Commercial pork production in this country consists of a complex,
`
`segmented process in which pigs pass through several different types
`
`of farms before they go to a different facility for slaughter and
`
`packing. ER59, 87, 89 (¶¶7, 127-128, 138). This vertically segmented
`
`production model is not random: it evolved to protect herd health, and
`
`also to achieve the economies of scale necessary to provide consumers
`
`with affordable pork products. ER59, 89 (¶¶7, 138-142).
`
`Proposition 12 mandates that farmers provide each sow with 24
`
`square feet of usable floor space and largely prohibits the use of
`
`individual stalls, even during the critical period between weaning and
`
`confirmation of pregnancy, when sows recover from the stress of
`
`giving birth, are bred, and then wait for the embryos to attach
`
`
`
`9
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 15 of 49
`
`
`
`themselves to the uterine wall. ER100-101 (¶¶240, 243). Both the
`
`square-feet requirement and the ban on breeding stalls are contrary
`
`to the practices of the vast majority of farmers and, many experienced
`
`farmers believe, are affirmatively harmful to sow health. ER105-06,
`
`120-22 (¶¶279-288, 389-410). Yet because of the impracticality of
`
`tracing a single cut of pork back to a particular sow housed in a
`
`particular manner from six months of age on, farmers everywhere
`
`will be required to conform their operations to comply with
`
`Proposition 12 for all of their sows. ER107-108 (¶¶297-301). That will
`
`impose hundreds of millions of dollars of upfront costs on sow
`
`farmers, increasing production costs by about 9.2% across the
`
`industry (and far more for many small family farmers); it will
`
`decrease herd sizes; and it will result in the flow of less—and more
`
`costly—pork in the nationwide market, not only in California. ER109-
`
`115 (¶¶305-350). Those allegations plausibly allege a claim that
`
`Proposition 12 regulates extraterritorially
`
`in violation of the
`
`Commerce Clause.3
`
`
`3 HSUS states that one diversified food company with a very
`small hog operation, Hormel Foods, issued a statement saying that it
`
`
`
`
`10
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 16 of 49
`
`
`
`As we explained in our opening brief, the Commerce Clause
`
`forbids the application of a state statute to commerce that occurs
`
`wholly outside the state. Daniels Sharpsmart, Inc. v. Smith, 889 F.3d
`
`608, 614 (9th Cir. 2018). In determining whether a state law has an
`
`exterritorial reach, “[t]he critical inquiry is whether the practical
`
`
`will comply with Proposition 12 and will not face “material losses” in
`doing so. HSUS Br. 11 n.3. That reference is improper and irrelevant.
`It is improper because HSUS may not interject new facts at the
`motion-to-dismiss stage. See Jacobson, 50 F.3d at 1496. The Court
`should disregard HSUS’s attempt to rebut Plaintiffs’ well-pleaded
`allegations, which
`include detailed accounts of the
`financial
`hardships that Plaintiffs’ member sow farmers will face under
`Proposition 12. ER68-77 (¶58), ER113-114 (¶¶333-335, 342). Unlike
`Hormel, Plaintiffs’ member farmers do not sell a vast array of non-
`pork products, such as Skippy Peanut Butter and Wholly Guacamole
`and the beef, chicken, and turkey that make losses from Proposition
`12 immaterial to Hormel’s overall financial picture.
`Anyway, Proposition 12 has limited impact on Hormel’s pork
`operations because in addition to owning very few sows regulated by
`Proposition 12, Hormel sells a significant amount of processed
`products like Spam, Hormel Chili, and pepperoni, and other ready to
`eat products such as Applegate Farms cold cuts, which are expressly
`not covered under Proposition 12, rather than the whole pork cuts
`that are subject to the law. ER102 (¶¶253-256). As Hormel’s most
`recent 10K filing states, “the Company has emphasized for several
`years the manufacturing and distribution of branded value-added
`consumer items rather than commodity fresh meat products.”
`Hormel Foods, Annual Report (Form 10-K) 3 (Oct 25, 2020),
`http://d18rn0p25nwr6d.cloudfront.net/CIK-0000048465/049e9679-
`5c2b-48fc-a67f-945fdc05db1f.pdf.
`
`
`
`11
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 17 of 49
`
`
`
`effect of the regulation is to control conduct beyond the boundaries of
`
`the State.” Healy v. Beer Inst., 491 U.S. 324, 336 (1989); see also
`
`NCAA v. Miller, 10 F.3d 633, 639 (9th Cir. 1993). Under that rule,
`
`Proposition 12 is an impermissible extraterritorial regulation.
`
`In practical effect, the complaint alleges, Proposition 12 will
`
`require that sow farms comply with the law regardless of whether
`
`pork from its market hogs are sold into California, because in the
`
`complex, multi-stage pork production process an individual cut of
`
`pork cannot practicably be segregated out and traced back to a
`
`particular sow. E.g., ER107 (¶298). And because not every part of a
`
`Proposition 12-compliant pig raised in this more costly manner will
`
`be sold in California, in practical effect consumers in other states will
`
`bear the cost of California’s law. ER83 (¶96), ER114 (¶¶346-347),
`
`ER139 (¶17). In both ways—its effect on out-of-state farmers and
`
`consumers—Proposition 12 has the effect of regulating conduct and
`
`transactions wholly outside the State.
`
`1.
`
`In practical effect, Proposition 12 regulates
`out-of-state commerce.
`
`a. The State asserts that, because “Proposition 12 addresses the
`
`standards for products that are sold in California,” it “regulates only
`
`
`
`12
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 18 of 49
`
`
`
`in-state commerce.” Cal. Br. 13. That argument misses the “critical
`
`inquiry” of examining the law’s “practical effect.” See Healy, 491 U.S.
`
`at 336; Daniels, 889 F.3d at 614. Indeed, the Supreme Court has said
`
`that the fact that a law “is addressed only to sales [in-state] is
`
`irrelevant if the ‘practical effect’ of the law is to control” conduct in
`
`other states. Brown-Forman Distillers Corp. v. N.Y. State Liquor
`
`Auth., 476 U.S. 573, 583 (1986) (emphasis added).
`
`The complaint alleges that Proposition 12 has the practical
`
`effect of regulating conduct outside California. The pork-production
`
`process generally involves multiple facilities in the production chain,
`
`frequently located in different states, so that the offspring of a single
`
`sow is typically raised in several farms in different locations before it
`
`is sent to a packer in still another location. ER88-89 (¶¶136-145).
`
`Throughout this process, millions of pigs from different sows and,
`
`later, cuts of pork from those pigs, are intermingled; tracing a single
`
`pig or pork cut back to a particular sow raised in particular conditions
`
`is not feasible. ER87-88 (¶¶128-133).
`
`Because tracing and segregation of market hogs and pork cuts
`
`back to sows housed under particular conditions is not practicable,
`
`
`
`13
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 19 of 49
`
`
`
`many out-of-state producers will have to conform their entire
`
`operation—including the production of pork sold into the other 49
`
`states—to Proposition 12’s requirements. ER107-108 (¶¶298-301). In
`
`other words, a pig raised entirely outside California (as virtually all
`
`pigs are) and whose cuts are sold partly, or even entirely, into states
`
`other than California (as virtually all pigs are) will have to be housed
`
`in conformity with Proposition 12. That is not speculation. As the
`
`complaint alleges, it is already happening: packers are informing
`
`their suppliers that all hogs sent to the packer must be Proposition
`
`12-compliant. ER108 (¶300). The complaint thus plausibly and
`
`clearly alleges that Proposition 12, in practical effect, does not
`
`“regulate only in-state commerce.”4
`
`The State counters that “Proposition 12 is indifferent to these
`
`out-of-state transactions” and that the choice to sell Proposition 12-
`
`compliant pork to other states “is not a direct and inevitable
`
`consequence of Proposition 12.” Cal. Br. 16. That argument ignores
`
`
`4
`The United States correctly explains that, although “some of
`these burdens would result from the decisions of other market
`participants rather than the direct terms of Proposition 12, they are
`properly subject to consideration and proof as part of determining the
`overall ‘practical effect’ of the law.” U.S. Am. Br. 21.
`
`
`
`14
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 20 of 49
`
`
`
`the well-pleaded allegations of the complaint that, due to the nature
`
`of the nationwide pork-production chain, which has been devised for
`
`animal-health reasons and to produce the affordable protein essential
`
`to food security, out-of-state pork producers do not have a meaningful
`
`choice about whether to comply with Proposition 12 for their entire
`
`operation. Because of the impracticalities of pig tracing or product-
`
`line segregation when pigs are transferred between farms for each
`
`stage of their life and a single animal is butchered into many cuts,
`
`many producers must inevitably conform to the dictates of the
`
`California law. ER107 (¶298).
`
`b. The State places principal reliance on Pharmaceutical
`
`Research and Manufacturers of America v. Walsh, 538 U.S. 644
`
`(2003), wrongly claiming that Proposition 12 operates in the same
`
`way as the drug-rebate program at issue there. Cal. Br. 17. Walsh
`
`arose at the preliminary-injunction stage, at which a plaintiff’s
`
`burden is particularly heavy. See 538 U.S. at 660 (stressing that “no
`
`matter how we answer the question whether petitioner’s showing was
`
`sufficient to support the injunction, further proceedings in this case
`
`may lead to a contrary result”). It involved a challenge to a Maine law
`
`
`
`15
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 21 of 49
`
`
`
`that created a program in which the state attempted to negotiate
`
`rebates with pharmaceutical manufacturers for drugs sold in Maine.
`
`The manufacturers alleged that the rebate law violated the dormant
`
`Commerce Clause because it would affect the prices manufacturers
`
`charged to drug distributors, the majority of which were located
`
`outside Maine. In rejecting that argument, the Court stated that the
`
`Maine statute “‘does not regulate the price of any out-of-state
`
`transaction, either by its express terms or by its inevitable effect.’”
`
`538 U.S. at 669. The Court went on to say that, unlike other dormant
`
`Commerce Clause cases such as Healy and Baldwin v. G.A.F. Seelig,
`
`Inc., 294 U.S. 511 (1935), the Maine statute did not require the
`
`manufacturers to sell their drugs to wholesalers at a certain price or
`
`tie the price of in-state sales to out-of-state prices. Walsh, 538 U.S. at
`
`669.
`
`Walsh is readily distinguishable. The Maine drug-rebate
`
`program did not affect out-of-state transactions between drug
`
`manufacturers and distributors or wholesalers “by its express terms
`
`or by its inevitable effect.” Id. Here, Plaintiffs plausibly allege that
`
`Proposition 12 will inevitably change how sow farms operate
`
`
`
`16
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 22 of 49
`
`
`
`nationwide and affect wholly out-of-state transactions among farmers
`
`and packers. E.g., ER107-108 (¶¶298-300). Furthermore, the Court in
`
`Walsh did not suggest that Maine’s rebate program would affect the
`
`prices manufacturers charged distributors for drugs that were not
`
`going to be sold in Maine. Here, Plaintiffs have made detailed
`
`allegations explaining that Proposition 12 will affect the supply and
`
`price of pork to consumers outside California. Thus, Walsh simply did
`
`not address the type of extraterritorial effects that Plaintiffs allege
`
`here.5
`
`The State misapprehends Plaintiffs’ claim as an argument that
`
`Proposition 12 is extraterritorial in effect simply because it imposes
`
`additional costs on out-of-state entities. Cal. Br. 17. True, Plaintiffs
`
`allege that Proposition 12 will require many hundreds of millions of
`
`
`5 HSUS places heavy reliance on this Court’s fuel-standards
`cases, Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th
`Cir. 2013), and Rocky Mountain Farmers Union v. Corey, 913 F.3d 940
`(9th Cir. 2019), which upheld California’s regulations governing how
`fuels are produced. HSUS Br. 14-19. But as this Court explained in
`the first of those cases, the fuel regulations at issue had some
`“upstream effects” but did “not control the production or sale of
`ethanol wholly outside California.” 730 F.3d at 1104. Plaintiffs here
`allege that the practical effect of Proposition 12 is that it will regulate
`how pork is produced and sold outside California. See Brown-Forman,
`476 U.S. at 583. The fuel-standard cases are therefore quite different.
`
`
`
`17
`
`

`

`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 23 of 49
`
`
`
`dollars of structural changes to facilities by those out-of-state sow
`
`farmers who can afford to make them. ER114 (¶342). And Proposition
`
`12 compliance will result in smaller herd sizes and other increased
`
`operating costs. ER111-113 (¶¶322-336). But those inevitable effects
`
`relate not only to pork sold in California; sow farmers will be forced to
`
`change their operations for all their sows, even if the pork cuts from
`
`those sows’ progeny are never sold in California. ER107-108 (¶¶298-
`
`301).

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge
throbber

Still Working On It

This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.

Give it another minute or two to complete, and then try the refresh button.

throbber

A few More Minutes ... Still Working

It can take up to 5 minutes for us to download a document if the court servers are running slowly.

Thank you for your continued patience.

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Your document is on its way!

If you do not receive the document in five minutes, contact support at support@docketalarm.com.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.





Document Unreadable or Corrupt

Refresh this Document
Go to the Docket

We are unable to display this document.

Refresh this Document
Go to the Docket