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`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 1 of 49
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`No. 20-55631
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`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
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`
`
`
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`Case: 20-55631, 01/14/2021, ID: 11963211, DktEntry: 53, Page 2 of 49
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`TABLE OF CONTENTS
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`
`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
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`
`
`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
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`
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`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
`
`
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`iii
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`
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`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
`
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`iv
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`INTRODUCTION
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`Plaintiffs’ 470-paragraph complaint plausibly alleges that
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`Proposition 12 regulates wholly out-of-state commerce and also fails
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`the Pike balancing test. Amici the United States and its Department
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`of Agriculture, 20 States that produce most of the Nation’s pork, and
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`the largest business trade groups in the country agree that these
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`claims should not have been dismissed and that Proposition 12
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`violates the dormant Commerce Clause.
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`The Supreme Court has repeatedly directed that the focus must
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`be on the law’s practical effect, and Proposition 12’s extraterritorial
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`effects on commerce are serious. Essentially all—99.8%—of the pork
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`Californians consume is imported from out of state. Hundreds of
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`thousands of out-of-state pigs are needed to supply that pork every
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`year. And every pig from which any cut of pork reaches California
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`necessarily bears Proposition 12’s substantial costs, meaning that
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`farmers and consumers everywhere pay for California’s preferred
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`animal-housing methods. In addition, because segregation and
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`tracing throughout the complex pork-production chain is not possible,
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`even pigs whose meat is sold entirely outside California will have to
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`come from Proposition 12-compliant facilities and will carry those
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`1
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`same costs. Inevitably, the per-pig costs of complying with Proposition
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`12 are borne by the suppliers and consumers of pork sold nationwide.
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`Although the complaint lays out these facts, Defendants largely
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`ignore them, pretending that Plaintiffs allege only that farmers will
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`have to pay to alter their sow facilities if meat from their pigs is sold
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`into California. The blow to out-of-state farmers will be severe, with
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`some certainly going out of business, but Plaintiffs allege more: that
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`the costs those farmers bear apply to huge quantities of pork sold
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`outside California, will reduce the supply of pork in interstate
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`commerce, and will increase pork prices nationwide.
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`Plaintiffs also allege that these significant burdens on interstate
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`commerce vastly outweigh Proposition 12’s minimal “benefit” to sow
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`welfare (the only benefit California asserts). Hardly any sows are
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`commercially farmed in California, so any welfare effects of the law—
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`which are illusory anyway, because the law harms rather than helps
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`sows—are felt almost entirely out-of-state.
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`The legal standards that apply at this preliminary stage of the
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`litigation are clear. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (to
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`survive dismissal, a complaint need contain only “sufficient factual
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`
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`2
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`matter … to ‘state a claim to relief that is plausible on its face’”)
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`(citation omitted); Harris v. Cnty. of Orange, 682 F.3d 1126, 1131 (9th
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`Cir. 2012) (Rule 12(b)(6) and 12(c) motions should be denied when the
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`complaint pleads sufficient facts to draw a reasonable inference of a
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`claim). Plaintiffs and amici have shown that the complaint easily
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`satisfies those requirements and should not have been dismissed. Yet
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`despite these standards, Defendants—in particular intervenors
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`Humane Society of the United States, Animal Legal Defense Fund,
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`and others (collectively, “HSUS”)—insist on referring to “facts”
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`outside the four corners of the complaint. Those irrelevant or
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`disputed “facts” would be an appropriate matter for inquiry on the
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`merits but have no place at the pleading stage.
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`Plaintiffs explain below why Defendants have not rebutted their
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`showing that the district court’s ruling should be reversed and
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`Plaintiffs given the opportunity to address the merits. Plaintiffs
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`explain in particular that none of the case law on which Defendants
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`rely supports dismissal here. To begin with, however, an observation
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`about the way Defendants seek to characterize this case and the
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`Plaintiffs is necessary.
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`3
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`Throughout their briefs, the Defendants try to lump the
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`Plaintiffs here in with the plaintiffs and claims in North American
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`Meat Institute v. Becerra, 420 F. Supp. 3d 1014 (C.D. Cal. Nov. 22,
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`2019) (“NAMI”), in which this Court recently affirmed the denial of a
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`motion to preliminarily enjoin Proposition 12. N. Am. Meat Inst. v.
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`Becerra, 825 Fed. App’x 518 (9th Cir. 2020), rhg. denied (Dec. 23,
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`2020). But NAMI was a challenge to Proposition 12 in its entirety and
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`not, as here, solely its provisions addressing pork. It arose at the
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`preliminary-injunction stage, where the legal standards are entirely
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`different. And the plaintiff organization there (“NAMI”) did not plead
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`a key basis of Plaintiffs’ claims here, which is that Proposition 12
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`imposes costs on every cut of pork from every pig, most of which will
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`never be sold in California.1
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`This Court’s decision in NAMI is a two-page, unpublished, non-
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`precedential memorandum. And this Court’s holding was that the
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`district court “did not abuse its discretion” in ruling that, based on
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`
`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).
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`4
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`the preliminary-injunction record, the plaintiff was “unlikely to
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`succeed on the merits.” The issue here is whether, on de novo review,
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`the allegations in the Plaintiffs’ complaint state a claim for relief.
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`In addition, NAMI represents primarily packers, which are
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`slaughterhouse operators who purchase market hogs from farmers
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`and then process them into cuts of meat that are sold to retail.
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`Plaintiffs here, the National Pork Producers Council and American
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`Farm Bureau Federation, mainly represent the farmers who operate
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`sow farms. It is Plaintiffs’ member farmers who will bear the costs of
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`retrofitting or building new Proposition 12-compliant farms and
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`implementing Proposition 12-compliant farming methods; whose sows
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`and workers will be endangered by the law’s requirements; whose
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`herd sizes will be reduced as a practical result of the law; and who are
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`being told by packers that, because of the impossibility of tracing and
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`segregating California-bound pork, all of their sows must be
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`Proposition 12-compliant. It is the reduction of these farmers’
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`productivity—from the increased space-per-sow requirement, the
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`increased sow mortality that comes with it, and pregnancy losses
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`because Proposition 12 bans the use of individual breeding stalls—
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`5
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`that will disrupt the national pork market, reduce the supply of pork,
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`and drive up consumer prices.
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`Declarant Phil Borgic, for example, an Illinois sow farmer,
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`explained that his options under Proposition 12 are cost-prohibitive:
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`to spend $3 million retrofitting his farm or reduce his herd size by a
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`third, destroying his farm’s productivity and making him unable to
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`meet his contractual commitments to deliver hogs. ER69 (¶58.b).
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`Moving from individual stalls to group pens also would harm the
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`welfare of his sows. Id. Greg Maher, a sow farmer in Missouri,
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`explained that his inability to bear the construction costs and
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`productivity losses from complying with Proposition 12 means that he
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`may have to exit the business. ER75 (¶58.i). Maher had converted to
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`group housing with 16 square feet per sow, using individual stalls
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`only during breeding and gestation, but is in the process of going back
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`to individual housing because his sow-mortality rate skyrocketed
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`along with his production costs. Id. It is Proposition 12’s impact on
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`farmers like these, not on the packers who make up the NAMI
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`plaintiffs, that disrupts nationwide commerce in pork—however
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`much California and HSUS confuse packers and the farmers who
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`6
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`supply them with hogs. Plaintiffs’ detailed allegations of Proposition
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`12’s practical effect on these farmers and the nationwide pork
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`market, including countless transactions occurring wholly outside
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`California, more than satisfy the pleading standard.
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`ARGUMENT
`
`I.
`
`PLAINTIFFS HAVE ADEQUATELY ALLEGED THAT
`PROPOSITION
`12
`IS
`AN
`IMPERMISSIBLE
`EXTRATERRITORIAL REGULATION.
`
`We explained in our opening brief that Proposition 12 regulates
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`extraterritorially in three ways. First, it controls transactions that
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`occur entirely outside California. Second, the audit and inspection
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`procedures necessary to enforce the law require intrusive out-of-state
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`inspections by California agents. Third, Proposition 12 threatens
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`conflict with regulatory regimes of other states. The amicus brief
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`submitted by Indiana and 19 other States confirms that the risk of
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`Balkanization of the Nation’s pork market through enactment of
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`conflicting state laws is not mere speculation. States’ Am. Br. 16-19.
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`Because any one of these reasons, let alone the extraordinary
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`confluence of all three, is sufficient to find that Proposition 12 is
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`impermissibly extraterritorial, Plaintiffs have stated a claim that
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`Proposition 12 violates the dormant Commerce Clause. If California
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`
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`7
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`can condition pork sales in the state on out-of-state farmers housing
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`sows in a particular way, it also can require that any goods sold in the
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`State have been made by workers paid a certain minimum wage or
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`provided with certain benefits. That is not, however, something the
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`dormant Commerce Clause allows.
`
`A. Proposition 12
`conduct.
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`regulates wholly out-of-state
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`Like the district court, Defendants largely ignore the well-
`
`pleaded allegations of the complaint.2 Plaintiffs’ complaint describes
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`the unique features of raising pigs for pork, in which a market hog
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`typically moves through different farms at different stages of life
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`before being processed into numerous cuts of pork destined for
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`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
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`transactions—among farmers, packing plants, and distributors—that
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`occur entirely outside California but will nonetheless effectively be
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`regulated by Proposition 12.
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`Plaintiffs allege that Californians consume a large proportion of
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`the Nation’s pork—about 13%—but that California farmers produce
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`only a miniscule fraction of that meat. ER61 (¶¶16-20). Nearly all
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`pork sold in California comes from pigs raised outside the State.
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`Commercial pork production in this country consists of a complex,
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`segmented process in which pigs pass through several different types
`
`of farms before they go to a different facility for slaughter and
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`packing. ER59, 87, 89 (¶¶7, 127-128, 138). This vertically segmented
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`production model is not random: it evolved to protect herd health, and
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`also to achieve the economies of scale necessary to provide consumers
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`with affordable pork products. ER59, 89 (¶¶7, 138-142).
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`Proposition 12 mandates that farmers provide each sow with 24
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`square feet of usable floor space and largely prohibits the use of
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`individual stalls, even during the critical period between weaning and
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`confirmation of pregnancy, when sows recover from the stress of
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`giving birth, are bred, and then wait for the embryos to attach
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`9
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`themselves to the uterine wall. ER100-101 (¶¶240, 243). Both the
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`square-feet requirement and the ban on breeding stalls are contrary
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`to the practices of the vast majority of farmers and, many experienced
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`farmers believe, are affirmatively harmful to sow health. ER105-06,
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`120-22 (¶¶279-288, 389-410). Yet because of the impracticality of
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`tracing a single cut of pork back to a particular sow housed in a
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`particular manner from six months of age on, farmers everywhere
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`will be required to conform their operations to comply with
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`Proposition 12 for all of their sows. ER107-108 (¶¶297-301). That will
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`impose hundreds of millions of dollars of upfront costs on sow
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`farmers, increasing production costs by about 9.2% across the
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`industry (and far more for many small family farmers); it will
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`decrease herd sizes; and it will result in the flow of less—and more
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`costly—pork in the nationwide market, not only in California. ER109-
`
`115 (¶¶305-350). Those allegations plausibly allege a claim that
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`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
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`As we explained in our opening brief, the Commerce Clause
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`forbids the application of a state statute to commerce that occurs
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`wholly outside the state. Daniels Sharpsmart, Inc. v. Smith, 889 F.3d
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`608, 614 (9th Cir. 2018). In determining whether a state law has an
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`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
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`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
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`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
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`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
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`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
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`in-state commerce.” Cal. Br. 13. That argument misses the “critical
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`inquiry” of examining the law’s “practical effect.” See Healy, 491 U.S.
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`at 336; Daniels, 889 F.3d at 614. Indeed, the Supreme Court has said
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`that the fact that a law “is addressed only to sales [in-state] is
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`irrelevant if the ‘practical effect’ of the law is to control” conduct in
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`other states. Brown-Forman Distillers Corp. v. N.Y. State Liquor
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`Auth., 476 U.S. 573, 583 (1986) (emphasis added).
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`The complaint alleges that Proposition 12 has the practical
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`effect of regulating conduct outside California. The pork-production
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`process generally involves multiple facilities in the production chain,
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`frequently located in different states, so that the offspring of a single
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`sow is typically raised in several farms in different locations before it
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`is sent to a packer in still another location. ER88-89 (¶¶136-145).
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`Throughout this process, millions of pigs from different sows and,
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`later, cuts of pork from those pigs, are intermingled; tracing a single
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`pig or pork cut back to a particular sow raised in particular conditions
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`is not feasible. ER87-88 (¶¶128-133).
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`Because tracing and segregation of market hogs and pork cuts
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`back to sows housed under particular conditions is not practicable,
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`13
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`many out-of-state producers will have to conform their entire
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`operation—including the production of pork sold into the other 49
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`states—to Proposition 12’s requirements. ER107-108 (¶¶298-301). In
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`other words, a pig raised entirely outside California (as virtually all
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`pigs are) and whose cuts are sold partly, or even entirely, into states
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`other than California (as virtually all pigs are) will have to be housed
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`in conformity with Proposition 12. That is not speculation. As the
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`complaint alleges, it is already happening: packers are informing
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`their suppliers that all hogs sent to the packer must be Proposition
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`12-compliant. ER108 (¶300). The complaint thus plausibly and
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`clearly alleges that Proposition 12, in practical effect, does not
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`“regulate only in-state commerce.”4
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`The State counters that “Proposition 12 is indifferent to these
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`out-of-state transactions” and that the choice to sell Proposition 12-
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`compliant pork to other states “is not a direct and inevitable
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`consequence of Proposition 12.” Cal. Br. 16. That argument ignores
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`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.
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`14
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`the well-pleaded allegations of the complaint that, due to the nature
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`of the nationwide pork-production chain, which has been devised for
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`animal-health reasons and to produce the affordable protein essential
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`to food security, out-of-state pork producers do not have a meaningful
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`choice about whether to comply with Proposition 12 for their entire
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`operation. Because of the impracticalities of pig tracing or product-
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`line segregation when pigs are transferred between farms for each
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`stage of their life and a single animal is butchered into many cuts,
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`many producers must inevitably conform to the dictates of the
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`California law. ER107 (¶298).
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`b. The State places principal reliance on Pharmaceutical
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`Research and Manufacturers of America v. Walsh, 538 U.S. 644
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`(2003), wrongly claiming that Proposition 12 operates in the same
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`way as the drug-rebate program at issue there. Cal. Br. 17. Walsh
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`arose at the preliminary-injunction stage, at which a plaintiff’s
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`burden is particularly heavy. See 538 U.S. at 660 (stressing that “no
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`matter how we answer the question whether petitioner’s showing was
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`sufficient to support the injunction, further proceedings in this case
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`may lead to a contrary result”). It involved a challenge to a Maine law
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`15
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`that created a program in which the state attempted to negotiate
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`rebates with pharmaceutical manufacturers for drugs sold in Maine.
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`The manufacturers alleged that the rebate law violated the dormant
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`Commerce Clause because it would affect the prices manufacturers
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`charged to drug distributors, the majority of which were located
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`outside Maine. In rejecting that argument, the Court stated that the
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`Maine statute “‘does not regulate the price of any out-of-state
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`transaction, either by its express terms or by its inevitable effect.’”
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`538 U.S. at 669. The Court went on to say that, unlike other dormant
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`Commerce Clause cases such as Healy and Baldwin v. G.A.F. Seelig,
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`Inc., 294 U.S. 511 (1935), the Maine statute did not require the
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`manufacturers to sell their drugs to wholesalers at a certain price or
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`tie the price of in-state sales to out-of-state prices. Walsh, 538 U.S. at
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`669.
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`Walsh is readily distinguishable. The Maine drug-rebate
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`program did not affect out-of-state transactions between drug
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`manufacturers and distributors or wholesalers “by its express terms
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`or by its inevitable effect.” Id. Here, Plaintiffs plausibly allege that
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`Proposition 12 will inevitably change how sow farms operate
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`16
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`nationwide and affect wholly out-of-state transactions among farmers
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`and packers. E.g., ER107-108 (¶¶298-300). Furthermore, the Court in
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`Walsh did not suggest that Maine’s rebate program would affect the
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`prices manufacturers charged distributors for drugs that were not
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`going to be sold in Maine. Here, Plaintiffs have made detailed
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`allegations explaining that Proposition 12 will affect the supply and
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`price of pork to consumers outside California. Thus, Walsh simply did
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`not address the type of extraterritorial effects that Plaintiffs allege
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`here.5
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`The State misapprehends Plaintiffs’ claim as an argument that
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`Proposition 12 is extraterritorial in effect simply because it imposes
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`additional costs on out-of-state entities. Cal. Br. 17. True, Plaintiffs
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`allege that Proposition 12 will require many hundreds of millions of
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`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.
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`17
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`dollars of structural changes to facilities by those out-of-state sow
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`farmers who can afford to make them. ER114 (¶342). And Proposition
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`12 compliance will result in smaller herd sizes and other increased
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`operating costs. ER111-113 (¶¶322-336). But those inevitable effects
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`relate not only to pork sold in California; sow farmers will be forced to
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`change their operations for all their sows, even if the pork cuts from
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`those sows’ progeny are never sold in California. ER107-108 (¶¶298-
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`301).