Supreme Court Pulls Back Dormant Commerce Clause in National Pork Producers Council v. Ross

The decision in National Pork Producers Council v. Ross is available here. Primary takeaways include:

• Under the decision, states appear to have more leeway to pass state-specific environmental or energy laws which impact out-of-state businesses. Justice Gorsuch’s opinion recognizes that “[e]nvironmental laws often prove decisive when businesses choose where to manufacture their goods” and that these sorts of laws have been “long understood to be valid exercises of States’ constitutionally reserved powers.”
• While there is general consensus as to the result of the case, the Court appears divided in terms of the rationale for the decision. It’s clear that laws that, on the surface, discriminate against interstate commerce will be held unconstitutional.
• The dormant commerce clause precludes state laws that discriminate against or have disproportionate negative effects on out-of-state commerce. It also limits state laws that regulate extraterritorial conduct outside the borders of the state. Here, the Court seems reluctant to extend the “dormant commerce clause” to cover laws with out-of-state impact that are not necessarily purposeful or to balance benefits and burdens. From this, it appears that the “dormant commerce clause” doctrine appears to be falling out of favor with the Court. Accordingly, future challenges to similar laws may likely be brought under other parts of the Constitution like the Full Faith and Credit Clause, the Import-Export Clause, or the Privileges and Immunities Clause.

Case Background

We previously blogged about National Pork here. The case involves a trade group challenge to California’s Proposition 12. Proposition 12 prevents the in-state sale of pork from pigs who are confined in cruel conditions that prevent the pig from “lying down, standing up, fully extending [its] limbs, or turning around freely.” The law was motivated by concerns about animal welfare, especially for pregnant pigs who can be encased in small crates and given minimal opportunities for exercise, and possible health concerns associated with close confinement. Massachusetts, Florida, Arizona, Maine, Michigan, Oregon, and Rhode Island have similar legal provisions regulating animal confinement practices.

The trade groups argued that Proposition 12 violated the dormant commerce clause by having impermissible extraterritorial effects and causing an excessive burden on interstate commerce. Since most of California’s pork is imported from other states, the majority of pork producers doing business there don’t currently follow the requirements and implementing changes to confinement and monitoring practices would be extremely costly.

The Ninth Circuit upheld the regulation because Proposition 12 functions the same as state restrictions on product labeling or state safety standards, which have previously found to be constitutional. The Supreme Court affirmed the decision to uphold the regulation, but with heavy division among the Justices about the ability of the court to weigh local benefits against out-of-state burdens. The Court’s rationale:

• There is no per se rule that a law with practical extraterritorial effects is unconstitutional. Justice Gorsuch expressed a worry about expanding the doctrine too far given the interconnectedness of the marketplace and narrowed the extraterritoriality doctrine expressed in previous case law by framing those cases as overruling facially discriminatory laws.
• Intellectually, the Court is fractured on both how to measure the benefits and burdens of a state law, and whether the Court is capable of balancing the potential benefits against the law’s burdens on interstate commerce. Justices Gorsuch, Thomas, and Barrett concluded that the legislature rather than courts should ultimately balance these competing interests. Justices Sotomayor and Kagan agreed that before a balancing test could be employed, a plaintiff had to first show a substantial burden on interstate commerce, which was not met by the pleadings in National Pork. However, they argued that courts were capable of comparing benefits and burdens. Finally, the remaining Justices in dissent concluded that the petitioners had alleged a substantial enough burden on out-of-state pork production, and that the case should have been remanded.

National Pork’s Potential Impact

Potential outcomes of the Supreme Court’s ruling include:

• The costs of changing confinement practices could cause supply chain disruptions and will likely raise the price of pork products.
• With states given more leeway to pass laws with state specific requirements, businesses could face problems when states have conflicting rules but want or need to participate in multiple markets.
• The decision could allow larger economy states like California to shift behavior across states by passing laws like this that condition participation in their lucrative market on meeting a certain criteria. The laws could condition participation on a wide range of moral criteria, expanding past animal welfare.

The Firm’s Environmental and Energy & Cleantech teams will continue to monitor case law and state policies in this area. Stay tuned here for further developments.