MAYER BROWN LLP TIMOTHY S. BISHOP (IL 6198062)

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PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS

CASE NO. 3:19-cv-02324-W-AHG

MAYER BROWN LLP TIMOTHY S. BISHOP (IL 6198062) (pro hac vice) [email protected] 71 S. Wacker Drive Chicago, Illinois 60606 Telephone: (312) 782-0600 Facsimile: (312) 701-7711 MAYER BROWN LLP C. MITCHELL HENDY (SBN 282036) [email protected] 350 South Grand Avenue 25th Floor Los Angeles, California 90071-1503 Telephone: (213) 229-9500 Facsimile: (213) 625-0248 Attorneys for Plaintiffs National Pork Producers Council & American Farm Bureau Federation (continued on following page)

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

NATIONAL PORK PRODUCERS COUNCIL & AMERICAN FARM BUREAU FEDERATION,

Plaintiffs,

v.

KAREN ROSS, in her official capacity as Secretary of the California Department of Food and Agriculture, SONIA ANGELL, in her official capacity as Director of the California Department of Public Health, and XAVIER BECERRA, in his official capacity as Attorney General of California,

Defendants,

THE HUMANE SOCIETY OF THE UNITED STATES; ANIMAL LEGAL DEFENSE FUND; ANIMAL EQUALITY; THE HUMANE LEAGUE; FARM SANCTUARY; COMPASSION IN WORLD FARMING USA; and COMPASSION OVER KILLING,

Defendants-Intervenors.

No. 3:19-cv-02324-W-AHG

PLAINTIFFS’ OPPOSITION TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS

NO ORAL ARGUMENT PURSUANT TO LOCAL RULE

Date: March 23, 2020 Courtroom: 3C Judge: Hon. Thomas J. Whelan Trial Date: None set Action Filed: Dec. 5, 2019

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i PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS


Additional Counsel for Plaintiffs MAYER BROWN LLP DAN HIMMELFARB (D.C. 978889) (pro hac vice) COLLEEN M. CAMPBELL(D.C. 219082) (pro hac vice) [email protected] [email protected] 1999 K. Street NW Washington, D.C. 20006 Telephone: (202) 263-3000 Facsimile: (202) 263-3300

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ii PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS


TABLE OF CONTENTS Page

TABLE OF AUTHORITIES ........................................................................ iii

INTRODUCTION ....................................................................................... 1

BACKGROUND ......................................................................................... 2

A. Proposition 12 ........................................................................... 2

B. Implementation Of Proposition 12 ............................................... 3

C. The Pork Supply Chain............................................................... 4

D. Sow Housing Practices ............................................................... 5

E. Procedural History ..................................................................... 6

LEGAL STANDARD .................................................................................. 7

ARGUMENT .............................................................................................. 7

I. PLAINTIFFS HAVE STATED A CLAIM THAT PROPOSITION 12 UNCONSTITUTIONALLY PROJECTS CALIFORNIA’S REGUL-ATORY REGIME INTO OTHER STATES. .......................................... 9

A. Proposition 12 Violates The Extraterritoriality Principle Because It Controls Commerce Outside Of California’s Borders................................................................................... 10

1. Proposition 12 substantially affects sales of pork meat between non-California parties. ........................................ 11

2. Proposition 12 substantially affects transactions among market participants that have nothing to do with California....................................................................... 11

3. Proposition 12 cannot be enforced without California intruding deeply into farm operations in other states. ........... 13

4. Proposition 12 unlawfully balkanizes hog production. ......... 14

5. The huge costs of complying with Proposition 12 exacerbate its extraterritorial effects. ................................. 16

B. Defendants Misconstrue Or Ignore Plaintiffs’ Well-Pled Allegations.............................................................................. 19

II. PLAINTIFFS HAVE STATED A CLAIM THAT PROPOSITION 12 UNCONSTITUTIONLLY BURDENS INTERSTATE COMMERCE. .... 21

III. PLAINTIFFS’ ALLEGATIONS DIFFER FROM THOSE IN NAMI. ...... 23

CONCLUSION ......................................................................................... 25

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iii PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS


TABLE OF AUTHORITIES

Page(s) Cases

Ashcroft v. Iqbal, 556 U.S. 662 (2009) ................................................................................. 7

Ass’n for Accessible Meds. v. Frosh, 887 F.3d 664 (4th Cir. 2018).................................................................... 25

Association des Eleveurs de Canards et d’Oies du Quebec v. Harris, 729 F.3d 937 (9th Cir. 2013)............................................................... 23, 24

Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573 (1986) ...................................................................... 9, 19, 21

C. & A. Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (1994) ................................................................................. 8

Daniels Sharpsmart, Inc. v. Smith, 889 F.3d 608 (9th Cir. 2018).................................................................... 19

Dean Milk Co. v. City of Madison, 340 U.S. 349 (1951) ............................................................................... 15

Duncan v. Becerra, 366 F. Supp. 3d 1131 (S.D. Cal. 2019) ...................................................... 22

Edgar v. MITE Corp., 457 U.S. 624 (1982) (plurality opinion)............................................ 8, 10, 25

Granholm v. Heald, 544 U.S. 460.......................................................................................... 15

Gregg v. Haw. Dep’t of Pub. Safety, 870 F.3d 883 (9th Cir. 2017)...................................................................... 7

Healy v. Beer Inst., Inc., 491 U.S. 324 (1989) ........................................................................ passim

Kassel v. Consol. Freightways Corp., 450 U.S. 662 (1981) ................................................................................. 9

Legato Vapors LLC v. Cook, 847 F.3d 825 (7th Cir. 2017)............................................................. passim

N. Dakota v. Heydinger, 825 F.3d 912 (8th Cir. 2016).................................................................... 25

NAMI v. Becerra, 2019 WL 6253701, No. 2:19-8569-CAS (C.D. Cal. Nov. 22, 2019) .......... 6, 23

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iv PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS


NAMI v. Becerra, 2020 WL 919153, No. 2:19-8569-CAS (C.D. Cal. Feb. 24, 2020)........ 6, 23, 24

Nat’l Ass’n of Optometrists & Opticians v. Harris, 682 F.3d 1144 (9th Cir. 2012) .................................................................. 17

Or. Waste Sys., Inc. v. Dep’t of Envtl. Quality of Or., 511 U.S. 93 (1994) ................................................................................... 7

Pac. Nw. Venison Prods. v. Smitch, 20 F.3d 1008 (9th Cir. 1994).................................................................... 21

Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) ........................................................................ passim

Publius v. Boyer-Vine, 237 F. Supp. 3d 997 (E.D. Cal. 2017) ....................................................... 24

In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130 (9th Cir. 2017) .................................................................... 7

Raymond Motor Transp., Inc. v. Rice, 434 U.S. 429 (1978) ............................................................................... 21

Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013) ....................................................... 20, 23, 24

Sam Francis Found. v. Christies, Inc., 784 F.3d 1320 (2015) ............................................................................. 25

Statutes, Rules and Regulations

An Act to Prevent Cruelty to Farm Animals, 2016 Mass. Acts 333 .............................................................................. 15

Cal. Health & Saf. Code § 25990 .................................................................... 3

Cal. Health & Saf. Code § 25991 ....................................................... 2, 3, 6, 14

Cal. Health & Saf. Code § 25993(a) ................................................................ 3

Cal. Bus. & Prof. Code § 17200 ...................................................................... 3

Ohio Admin. Code 901:12-8-02(G)(4), (5) ..................................................... 15

Other Authorities

CDFA, Draft Article 5. Certification and Accredited Certifiers (Dec. 23, 2019), https://www.cdfa.ca.gov/ahfss/pdfs/ Article5Certification DRAFT12232019.pdf ...................................... 4, 13, 14

Pew Comm’n on Industrial Farm Animal Production, Putting Meat on the Table: Industrial Farm Animal Production in America (2008) ................ 22

U.S. Const. art. I, § 8, cl. 3 ............................................................................. 7

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INTRODUCTION

California produces hardly any pork. Compl. ¶¶ 16-19. But California

residents consume 13% of the pork eaten in the U.S. Id. ¶ 20. As a result, California

imports huge quantities of pork raised in other states. The offspring of around

673,000 sows is required annually to satisfy California consumers’ demand for pork

meat—yet only about 1,500 sows are commercially bred in California. Id. ¶¶ 18-20.

Proposition 12 imposes California’s preferred animal husbandry methods on the

producers of all these out-of-state raised pigs. Furthermore, because pork is a

complex national market, in which most hogs are not bred for a single state’s market

and each hog is butchered into many cuts of meat that are shipped to different buyers

all across the country, Proposition 12 in fact regulates the housing of far more sows

than that. Its requirements—which are met only by a tiny fraction of sow farms—

substantially interfere with a complex nationwide market served by thousands of

farmers and are not confined to pork sold in California. Id. ¶¶ 279-304, 342-347.

And policing Proposition 12 inevitably inserts California’s regulatory tentacles deep

into farms and plants beyond its boundaries. Id. ¶¶ 58, 73-92.

Proposition 12 does all that to serve two “benefits” that were touted to voters.

Compl. ¶ 268. One—human health—is so illusory that the State and the intervenor

animal rights activists now decline to defend it. Dkt. 18-1, at 12 n.6; Dkt. 19, at 14-

15. The other—preventing animal cruelty—is so unsupported by facts (indeed,

contradicted by them) that it cannot justify the enormous burdens Proposition 12

imposes on nationwide commerce in pork.

Because of its direct extraterritorial effects, and also because its burdens on

interstate commerce easily outweigh any benefits it might have, Proposition 12

violates the Commerce Clause and should, as to pork, be enjoined. Defendants’

arguments that plaintiff National Pork Producers Council’s and American Farm

Bureau Federation’s Complaint should be dismissed play fast and loose with the

Rule 12 standards and rest on an incorrect understanding of our allegations and of

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2 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS


the law. Defendants’ Motion to Dismiss and Defendant-Intervenors’ Motion for

Judgment on the Pleadings should be denied and this case allowed to proceed to

develop the facts about California’s extraterritorial law and the burdens it imposes.

BACKGROUND

A. Proposition 12

Drafted and sponsored by animal rights activists, Proposition 12 is a ballot

initiative passed in November 2018. See Prevention of Cruelty to Farm Animals Act,

Prop. 12 (Nov. 6, 2018). It amends the California Health and Safety Code by

redefining supposedly “cruel” animal confinement for covered farm animals,

including, as relevant here, breeding pigs. Id. §§ 3, 4(e). Proposition 12 purports to

“prevent animal cruelty by phasing out extreme methods of farm animal

confinement, which also threaten the health and safety of California consumers, and

increase the risk of foodborne illness and associated negative fiscal impacts on the

State of California.” Id. § 2. Proposition 12 is an outlier: “the strongest law of its

kind in the world,” according to the Animal Legal Defense Fund. See

https://perma.cc/J7T5-98XP.

Proposition 12 governs housing standards for “breeding pig[s],” defined as

female pigs kept for commercial breeding that are “six months or older or pregnant.”

Cal. Health & Saf. Code § 25991(a). Commonly called “sows,” these pigs give birth

to the market hogs that provide the vast majority of pork meat. Compl. ¶¶ 8-9. Sows

themselves make up only a very small portion of pigs slaughtered for meat—and

most sow meat is sold cooked, processed, or in combination products and therefore

is not covered by Proposition 12, which governs sales of uncooked whole cuts of

pork. Id. ¶ 10; Cal. Health & Saf. Code § 25991(u).

Proposition 12 bans sales of covered pork meat in California when the seller

knows or should know that it came from a sow confined in a manner that Proposition

12 prohibits or from the offspring of such a sow. Id. § 25990(b)(2). Proposition 12

forbids housing a sow “in a manner that prevents the animal from lying down,

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standing up, fully extending the animal’s limbs, or turning around freely.” Id.,

§§ 25990(a); 25991(e)(1). This “stand-up turn-around” requirement effectively

requires sows be held in group pens rather than in individual pens, because

individual pens designed to hold one sow apiece do not allow sows to turn around,

for hygiene, safety, and caretaking reasons. Compl. ¶¶ 15, 24. After December 31,

2021, Proposition 12 in addition forbids housing a sow “with less than 24 square feet

of useable floor space per pig.” Cal. Health & Saf. Code §§ 25990(a); 25991(e)(3).1

Proposition 12 permits narrow exclusions from its confinement requirements,

including for five days before a breeding pig gives birth (or “farrows”) and while it

is nursing piglets (for about 21 days); for animal husbandry during very limited time

intervals; for veterinary purposes; for medical research; and during transportation,

shows, or slaughter. Id. § 25992(a)-(g).

A sale of pork in California that does not comply with Proposition 12 is a

criminal offense punishable by a $1,000 fine and 180 days in prison. Id. § 25993(b).

A violation also subjects a seller to a civil action for damages or injunctive relief

under California Business & Professional Code Section 17200. Id.

B. Implementation Of Proposition 12

Proposition 12 directed the California Department of Food and Agriculture

(“CDFA”) and Department of Public Health (“CDPH”) to produce final

implementing regulations by September 1, 2019. Cal. Health & Saf. Code

§ 25993(a). The agencies missed that deadline, but CDFA has explained on its

webpage that it is considering verifying compliance with Proposition 12 through

audits and certification of farms. Compl. ¶ 302. An indicator of what those

1 Proposition 12’s requirements expand those imposed by a prior ballot initiative, Proposition 2, titled Standards for Confining Farm Animals, which was also

spearheaded by animal rights activists. Passed in 2008, Proposition 2 imposed stand-up turn-around requirements on sows raised in California, with an effective date of January 1, 2015, providing six years for California farmers to come into compliance.

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regulations might look like is CDFA’s pre-proposal draft rules governing certifi-

cation of egg-production facilities as “California compliant operation[s].” CDFA,

Draft Article 5. Certification and Accredited Certifiers (Dec. 23, 2019),

https://www.cdfa.ca.gov/ahfss/pdfs/Article5CertificationDRAFT12232019.pdf

(“Draft Article 5”). Those regulations contemplate highly intrusive inspections and

certification of out-of-state farms by agents of California. Id.2

C. The Pork Supply Chain

Across the United States, some 65,000 farmers market about 125 million hogs

per year for gross sales of $26 billion annually. Compl. ¶ 111. Although pigs are

raised across the country, sow farms are heavily concentrated in the Midwest and

North Carolina. Id. ¶ 5. Very little pork is produced in California—only a small

fraction of 1 percent of the State’s substantial pork consumption, which is estimated

at about 13 percent of the total U.S. market. Id. ¶¶ 18-20.

Commerce in pork is complex and segmented. Multiple steps, transactions,

and actors are involved between the time when a piglet is born on a sow farm and

when a cut of pork meat reaches the ultimate consumer. Compl. ¶¶ 7, 127-128.

At the beginning of the supply chain, sows housed on breeding farms give

birth to piglets, which are generally moved to nursery farms after weaning at about

2 Section 1326.1 would provide that “authorized representatives of [CDFA]” must be given inspection “access to the production or handling operation, including

noncertified production and handling areas,” “offices,” and “pastures, fields, equipment, structures, and houses where covered animals and covered animal products may be kept, produced, processed, handled, stored or transported, including * * * all enclosures for covered animals,” and must be allowed “to examine all covered products that are sold or intended, held, segregated, stored, packaged, labeled, or represented for sale or distribution,” and all “containers, labels, labeling, invoices, and bills of lading used in the handling, storage, packaging, sale, transportation or distribution of covered products,” as well as be given access “for

review and copying of records.” Id. (emphasis added). Section 1326.2 mandates that out-of-state farmers keep detailed records to facilitate California’s inspection and certification of their operations. See id.

https://www.cdfa.ca.gov/ahfss/pdfs/Article5CertificationDRAFT12232019.pdf

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21 days. Compl. ¶ 142.3 At six to eight weeks, piglets have grown into “feeder pigs”

and are commonly transferred again to separate facilities. Id. ¶ 143. After 16 to 17

weeks at a finishing farm, pigs are sent to packer-slaughter facilities. Id. ¶ 144. Many

hog farmers sell their market hogs to packers through years-long supply agreements.

Id. ¶ 126. Packers slaughter and butcher the market hogs and sell their pork to

wholesalers or retailers, which then distribute it to consumers. Id. ¶ 124. While some

operations are vertically integrated so that one company handles multiple steps (id.

¶ 123), supply chain participants often include independent farmers, “processors,

brokers, distributors, warehouses, retailers, [and] food-service operators.” Id. ¶ 127.

D. Sow Housing Practices

About 72% of U.S. pork producers house their sows in individual pens

throughout gestation. Compl. ¶ 286. Most individual pens provide around 14 square

feet per sow and do not allow the sow to turn around, and so do not comply with

Proposition 12. Id. ¶ 152 & Ex. O, ¶ 11. Farmers use pens to provide a sow with

individual access to water and feed without competition or aggression from other

sows. Id. ¶¶ 156-57. This reduces animal stress, injury, and mortality rates on farms,

and protects workers. Id. ¶¶ 74-90, 159, 394-95.

The remainder of farmers house sows in group pens that generally provide

around 16 to 18 square feet per sow and so do not comply with Proposition 12’s 24

square feet per sow requirement. Compl. ¶ 162. Of the roughly 28% of farmers that

use group housing, almost all nevertheless rely on individual breeding pens for the

30 to 40 days between the time a sow finishes weaning a litter through the time it

enters estrus, is re-bred, and pregnancy is confirmed—a practice that does not

comply with Proposition 12. Id. ¶¶ 79-82, 287. Farmers use breeding pens during

this period to assist with animal husbandry, provide sows with nutrition tailored to

3 The rapid removal of offspring from sow facilities, and separation of sow farms from other hog facilities, is essential for biosecurity—i.e., to protect sow herds from disease. Compl. ¶¶ 140-142.

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their needs after weaning, protect sows against the loss of pregnancy or a drop in

litter size due to aggression from other sows, and protect workers. Id. ¶¶ 79-90, 181-

206.

Farmers house young, unbred pigs (called “gilts”) separately, most commonly

in group pens with less space per pig because gilts are smaller than mature sows.

Compl. ¶ 92. Farmers breed gilts for the first time when they are about seven months

old, which means that Proposition 12’s requirements bar the sale in California of

meat from gilts’ subsequent offspring. Id. ¶¶ 92, 244-249; Cal. Health & Saf. Code

§ 25991(a) (only gilts under six months excluded from Proposition 12 requirements).

E. Procedural History

Plaintiffs filed this lawsuit on December 5, 2019, to enjoin the enforcement

of Proposition 12 as applied to pork raised outside California and obtain a

declaration that it violates the dormant Commerce Clause. Plaintiffs contend that

Proposition 12 impermissibly regulates extraterritorially and also excessively

burdens interstate commerce compared with its putative local benefits. Animal rights

activists led by the Humane Society of the United States (collectively, “HSUS”) filed

a Motion to Intervene as defendants on December 18, 2019, which was granted on

January 9, 2020. On January 10, 2020, California filed a Motion to Dismiss, and

HSUS filed a Motion for Judgment on the Pleadings.4

4 On October 4, 2019, the North American Meat Institute (“NAMI”), which represents packers, filed a lawsuit challenging Proposition 12’s standards for veal and pork production under the dormant Commerce Clause premised on Proposition 12’s disruptive effect on packers. NAMI v. Becerra, No. 2:19-8569-CAS (C.D. Cal. 2019). The Central District denied NAMI’s Motion for a Preliminary Injunction. NAMI v. Becerra, 2019 WL 6253701 (C.D. Cal. Nov. 22, 2019), appeal pending, No. 19-56408 (9th Cir. 2019)). On February 24, 2020, that district court denied the State’s motion to dismiss NAMI’s claim that Proposition 12 violates the Commerce

Clause because its burdens on interstate commerce outweigh its local benefits, but dismissed NAMI’s extraterritoriality claim, without prejudice to amending the complaint. 2020 WL 919153. Those rulings are addressed in part III, infra.

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LEGAL STANDARD

To survive a motion to dismiss, a complaint need only contain “sufficient

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its

face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the

plaintiff pleads factual content that allows the court to draw the reasonable inference

that the defendant is liable for the misconduct alleged.” Id. “[A]ll allegations of

material fact [should be taken] as true and construe[d] * * * in the light most

favorable to the nonmoving party.” In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130,

1140 (9th Cir. 2017) (internal quotation marks omitted). The same standard applies

to a motion for judgment on the pleadings. Gregg v. Haw. Dep’t of Pub. Safety, 870

F.3d 883, 887 (9th Cir. 2017).

ARGUMENT

Plaintiffs oppose these motions because plaintiffs have sufficiently pled that

Proposition 12 violates the Commerce Clause. Plaintiffs have alleged that

Proposition 12 has direct extraterritorial effects, and also imposes burdens on

interstate commerce that outweigh any benefits it might have. Defendants’ and

HSUS’ arguments to the contrary distort Rule 12 standards and rest on incorrect

understandings of our allegations and of the law. The legal principles that govern

plaintiffs’ claims are well established.

Extraterritorial regulation. The Commerce Clause grants Congress the power

“[t]o regulate Commerce with foreign Nations, and among the several States.” U.S.

Const. art. I, § 8, cl. 3. “The Framers granted Congress plenary authority over

interstate commerce in ‘the conviction that in order to succeed, the new Union would

have to avoid the tendencies toward economic Balkanization that had plagued

relations among the Colonies and later among the States under the Articles of

Confederation.’” Or. Waste Sys., Inc. v. Dep’t of Envtl. Quality of Or., 511 U.S. 93,

98 (1994) (quoting Hughes v. Oklahoma, 441 U.S. 322, 325–26 (1979)). This

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affirmative grant of power to Congress “has long been understood to have a

‘negative’ aspect that denies the States the power unjustifiably to * * * burden the

interstate flow of articles of commerce.” Id. That includes state laws that have the

“practical effect” of governing “commerce that takes place wholly outside of the

State’s borders, whether or not the commerce has effects within the State.” Healy v.

Beer Inst., Inc., 491 U.S. 324, 336 (1989) (internal quotation marks omitted). A state

law with the practical effect of regulating extraterritorially violates the “dormant”

Commerce Clause “regardless of whether the statute’s extraterritorial reach was

intended by the legislature.” Id.

Accordingly, the Commerce Clause bars the “projection of one state

regulatory regime into the jurisdiction of another State.” Healy, 491 U.S. at 337. A

state may not “attach restrictions to * * * imports in order to control commerce in

other States” because that “would extend the [State’s] police power beyond its

jurisdictional bounds.” C. & A. Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383,

393 (1994). When the practical effect of a law is to “regulate directly * * * interstate

commerce, including commerce wholly outside the State, it must be held invalid.”

Edgar v. MITE Corp., 457 U.S. 624, 643 (1982) (plurality opinion); see Healy, 491

U.S. at 336 (under “our cases concerning the extraterritorial effects of state economic

regulation,” the “critical inquiry is whether the practical effect of the regulation is to

control conduct beyond the boundaries of the State”).

“[T]he practical effect of the statute” is to “be evaluated not only by

considering the consequences of the statute itself, but also by considering how the

challenged statute may interact with the legitimate regulatory regimes of other

States.” Healy, 491 U.S. at 336. This extraterritoriality principle reflects “[t]he

Constitution’s special concern both with the maintenance of a national economic

union unfettered by state-imposed limitations on interstate commerce and with the

autonomy of the individual States within their respective spheres.” Id. at 335–36.

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Excessive burden. A law also violates the dormant Commerce Clause when

“the burden imposed on [interstate] commerce is clearly excessive in relation to the

putative local benefits.” Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970). A

state law that significantly impairs interstate commerce to serve a state interest that

is illegitimate or illusory “cannot be harmonized with the Commerce Clause.” Kassel

v. Consol. Freightways Corp., 450 U.S. 662, 670–71 (1981) (plurality opinion).

Proposition 12 fails both of these tests. By regulating and policing out-of-state

farming practices, including the production of pork that is not sold into California,

Proposition 12 projects California’s police power into other states and infringes on

other states’ ability to regulate animal husbandry within their own borders.

Proposition 12 also imposes burdens on the interstate market in pork that are

excessive in light of its illusory or insubstantial local benefits. On both of those

grounds, it is unconstitutional and should be struck down. Certainly, plaintiffs

detailed allegations and supporting declarations are sufficient to survive defendants’

motions at this stage and to warrant further factual development of their claims.

I. PLAINTIFFS HAVE STATED A CLAIM THAT PROPOSITION 12 UNCONSTITUTIONALLY PROJECTS CALIFORNIA’S REGUL-ATORY REGIME INTO OTHER STATES.

Plaintiffs have stated a claim that Proposition 12 violates the extraterritoriality

principle of the dormant Commerce Clause by directly regulating commerce

occurring in other states. Proposition 12 has the sort of breathtaking extraterritorial

reach, controlling “the design and operation of out-of-state production facilities,”

that led the Seventh Circuit to strike down an Indiana law in Legato Vapors LLC v.

Cook, 847 F.3d 825, 827 (7th Cir. 2017). And it interferes far more directly with

interstate commerce than the laws upheld by the Ninth Circuit in decisions upon

which defendants rely. A statute that directly regulates interstate commerce is

“generally struck down.” Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth.,

476 U.S. 573, 579 (1986).

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A. Proposition 12 Violates The Extraterritoriality Principle Because It Controls Commerce Outside Of California’s Borders.

All parties agree: the relevant legal question is whether Proposition 12 directly

regulates conduct that occurs in other states. Dkt. 19, at 8 n.5; see also Dkt. 18-1, at

8 (law violates extraterritoriality when it “regulate[s] transactions occurring entirely

out-of-state”). Defendants’ contention that Proposition 12 affects activities and

transactions solely in California (Dkt 18-1, at 8-9; Dkt. 19, at 7) is contradicted by

our allegations that Proposition 12 has the inevitable practical effect of controlling

wholly out-of-state conduct. Those plausible allegations must be credited.

To begin at the simplest level, California consumes 13 percent of pork sold in

the U.S., and the vast majority of that pork—more than 99 per cent—comes from

hogs raised in other states. Dkt. 19, at 10 n.6; Compl. ¶¶ 16-17, 20. As a result,

Proposition 12 necessarily regulates the conduct of the predominantly Midwestern

farmers who raise the hundreds of thousands of sows whose offspring provide pork

sold into California. In other words, California’s huge market for pork meat runs

almost entirely on out-of-state farmers, and so does Proposition 12.

But Proposition 12’s reach into out-of-state commercial transactions goes far

deeper than even these numbers disclose: it directly affects transactions that have

nothing to do with California. Proposition 12 effectively regulates transactions and

conduct that occur wholly within other states, and the production of pork that is not

sold into California. See Edgar v. MITE Corp., 457 U.S. at 642 (striking down

Illinois law with “sweeping extraterritorial effect” because it applied to transactions

that “would not affect a single Illinois shareholder”); Legato Vapors, 847 F.3d at

837 (striking down Indiana law that “directly regulates the production facilities and

processes of out-of-state manufacturers and thus wholly out-of-state commercial

transactions”). That is so for a number of distinct reasons.

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1. Proposition 12 substantially affects sales of pork meat between non-California parties.

For the most part, wholesalers and retailers in California sell, and Californians

buy, individual cuts of pork meat, not whole hogs. Market hogs are butchered at out-

of-state plants into pork cuts of many different types—both Proposition 12-covered

whole cuts and other cuts that are processed or sold in “combination food products”

and so are not covered (Compl. ¶¶ 254-257)—and those cuts are then distributed

throughout the country. Id. ¶ 96. If any covered meat at all from a hog is sold into

California, the sow it comes from must have been raised in conformity with

Proposition 12. Id. ¶ 346. As a result, all non-California buyers of any pork from

offspring of that sow necessarily buy Proposition 12 compliant pork—whether there

is any demand for it in those states or not (id. ¶ 347)—with the additional cost that

entails for farmers, packers, and consumers.

Proposition 12 imposes enormous compliance costs on farmers (Compl.

¶¶ 305-342); per pig production costs will increase by 9.2 percent or $13 a head. Id.

¶ 343. And there is no possibility that all cuts from all Proposition 12 compliant pigs

will be sold into California, though it is California’s regulations that cause those

huge cost increases. Thus the entire national market, including countless sellers and

buyers entirely outside California, will in practice, and inevitably, be adversely

affected by Proposition 12, and wholly out-of-state markets will be disrupted.

In short, California imposes its costly sow housing mandates on the whole

hog, even though parts of the hog’s meat will be sold into other states. That direct

effect on millions of transactions occurring wholly outside of California is forbidden

by the Commerce Clause’s bar on extraterritorial regulation.

2. Proposition 12 substantially affects transactions among market participants that have nothing to do with California.

Proposition 12 also distorts transactions among market participants outside

California and that effect will not be tied to whether a cut of pork meat is ultimately

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destined for California. In the vast majority of cases, it is not the farmers caring for

sows that directly sell pork into California. Many other actors and transactions are

involved in a complex, nationwide, multi-step supply chain. Compl. ¶ 127. Retailers

and wholesalers who sell pork meat in California usually receive it from packers and

slaughterhouses (id. ¶¶ 126-127), who in turn receive hogs from finishing farms (id.

¶¶ 130, 144), who in turn may receive feeder pigs from nurseries (id. ¶ 142), who in

turn may receive piglets from sow farms. Id. ¶ 143. Proposition 12 stands to impact

all of these out-of-state transactions, as up-stream actors force farmers at the

different stages of production to segment their supply (a requirement that many

producers will not be able to meet), or produce all their pigs to Proposition 12’s

specifications, or simply end the business relationship. Id. ¶¶ 297-300, 336-339.

For example, compliance with Proposition 12 will mean tracking pork meat

back to a particular sow’s housing, which means tracing and segregating Proposition

12-compliant market hogs throughout the stages described above. Compl. ¶ 297.

That tracking and segregating of hogs will be necessary regardless of what portion

of the meat from a hog eventually is sold in California, and even if most of it is sold

elsewhere.

Alternatively, to avoid complex tracing and segregation—and to reflect the

fact that a farmer is almost always uncertain at the time a piglet is farrowed where

its meat will eventually be sold—packers or other purchasers may demand that

farmers produce all of their hogs in compliance with Proposition 12. Again, that

means farmers will need to comply with Proposition 12 for hogs only partially or

not at all destined for California markets. Compl. ¶¶ 298-299. This extraterritorial

effect is not hypothetical: some buyers have already demanded that their hog

suppliers meet California’s specifications for all products they buy. Id. ¶ 300.

Thus, as plaintiffs allege, Proposition 12 has an impermissible extraterritorial

effect because sow farms will be required to comply with Proposition 12 for all their

animals, or they will need to apply tracing and segregation to animals raised in

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compliance with Proposition 12 even when many cuts from those animals will go to

other states. Compl. ¶¶ 297, 301. That is a direct effect on conduct and transactions

having nothing to do with California.

3. Proposition 12 cannot be enforced without California intruding deeply into farm operations in other states.

In addition, California’s enforcement of Proposition 12 will necessarily

involve extraterritorial regulation. CDFA has said that it is considering direct field

verification audits or inspections. Those audits and inspections by State agents will

occur almost entirely on out-of-state farms, many of which supply hogs that are

ultimately sold as pork cuts to many different states. Compl. ¶ 302. While regulations

implementing Proposition 12 for pork have not yet been adopted, CDFA has

published a draft proposal for egg product compliance that relies on inspection and

monitoring. See p.4 n.2, supra. That draft sheds light on the likely framework for

enforcing Proposition 12 as to pork products—indeed, it is hard to imagine how

California could police Proposition 12 other than through some type of on-the-

ground audit of out-of-state farms.

The breadth of the enforcement power that CDFA thinks it needs to police

Proposition 12 is astonishing. Under the Proposition 12 egg proposal, “authorized

representatives of the [CDFA]”—agents of the State of California—would demand

access to out-of-state sow farms to inspect every aspect of “the production or

handling operation, including noncertified production and handling areas” (i.e.,

including areas with no claim to be Proposition 12 compliant and supplying eggs

destined for other states), as well as “offices,” and “pastures, fields, equipment,

structures, and houses where covered animals and covered animal products may be

kept, produced, processed, stored or transported.” See Draft Article 5; Cal. Health &

Saf. Code § 25991(f) (“‘[c]overed animal’ means any * * * breeding pig * * * who

is kept on a farm”) (emphasis added). California agents would also assert the right

to examine “all covered products that are sold or intended, held, segregated, stored,

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packaged, labeled, or represented for sale or distribution,” and all “containers, labels,

labeling, invoices, and bills of lading used in the handling, storage, packaging, sale,

transportation or distribution of covered products” (i.e., including, inevitably,

products and paperwork with no connection to sales into California). Draft Article

5. California would also require out-of-state farmers to keep detailed records to

facilitate its inspection and certification of their operations. See id.

More intrusive regulation of business property located in another state and

going well beyond products and activities to be sold into California is hard to

imagine. A less intrusive audit scheme was held to violate the Commerce Clause in

Legato Vapors, where the Seventh Circuit explained that Indiana’s “audits and on-

site inspections of out-of-state manufacturers are invalid direct regulations of

interstate commerce insofar as they relate to enforcement of Indiana’s requirements

for facility design and production operations.” 847 F.3d at 836. The same type of

flaw should lead to the same result here.

4. Proposition 12 unlawfully balkanizes hog production.

Proposition 12’s extraterritorial overreach is reflected in its intrusion into

other states’ ability to regulate animal husbandry practices inside their own borders.

When determining whether a statute operates extraterritorially, courts consider “how

the challenged statute may interact with the legitimate regulatory regimes of other

States” and “what effect would arise if not one, but many or every, State adopted

similar legislation.” Healy, 491 U.S. at 336. In particular, a state law has an

impermissible extraterritorial effect when it places out-of-state businesses at risk of

inconsistent regulation. Id.; see also Legato Vapors, 847 F.3d at 834 (holding that

“the threat of inconsistent regulation, not inconsistent regulation in fact,” is

sufficient to show unlawful extraterritoriality, and striking down an Indiana statute

where other states had adopted “their own distinct regulatory regimes” with “less

stringent” requirements).

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That risk is present here. States whose conceptions of “animal cruelty” differ

from California’s could impose competing definitions that give rise to different or

even conflicting sow housing standards. For example, states may allow or even

require use of an individual breeding pen to promote animal welfare in

circumstances where breeding stalls could not be used under Proposition 12. Indeed,

Ohio has passed regulations that recognize the utility of breeding pens to animal

welfare at times when Proposition 12 would not allow them. See Ohio Admin. Code

901:12-8-02(G)(4), (5) (permitting use of breeding pens during post-weaning “to

maximize embryonic welfare and allow[] for the confirmation of pregnancy”). Other

states may recognize 24 square feet as too much space for optimum sow welfare and

prescribe a smaller figure. See Compl. ¶¶ 382-388. A mosaic of state standards

would inhibit a well-functioning interstate market and “create just the kind of

competing and interlocking local economic regulation that the Commerce Clause

was meant to preclude.” Healy, 491 U.S. at 337.

HSUS acknowledges that the risk of additional regulation is imminent, not

speculative. As HSUS explains it, Proposition 12 has galvanized other states to pass

legislation. Dkt. 19, at 4 (citing Oregon and Washington regulations with respect to

eggs). Massachusetts voters have already adopted legislation that exports stand-up

turn-around requirements for breeding pigs into other states. See An Act to Prevent

Cruelty to Farm Animals, 2016 Mass. Acts 333. As states cordon off their markets,

granting access only to out-of-state producers who implement their prescribed

animal welfare standards, the “multiplication of preferential trade areas” will be

“destructive of the very purpose of the Commerce Clause.” Dean Milk Co. v. City of

Madison, 340 U.S. 349, 356 (1951); see also Granholm v. Heald, 544 U.S. 460, 472-

73 (“proliferation of trade zones is prevented” by the constitutional prohibition on

extraterritorial regulation). For this reason too, Proposition 12 should be enjoined.

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5. The huge costs of complying with Proposition 12 exacerbate its extraterritorial effects.

The new costs imposed on businesses at every stage of pork production cannot

be confined to a California-only bucket: the entire national market in pork is affected

by the enormous expenditures Proposition 12 requires. Those costs are exported

throughout the national economy because hogs are raised nationwide (principally

outside California), pork production for nationwide sales depends on countless

transactions between non-California market participants, and the sale of cuts from a

single hog are rarely confined to a single state. The very size of the new costs

guarantees nationwide market distortions, especially given the specific out-of-state

effects described above.

To comply with Proposition 12, pork producers must incur transition costs

that are particularly steep given the expedited time period to come into compliance

(Compl. Ex. C, ¶ 10), compared with the six years that California farmers were

granted to comply with Proposition 2. See p.3, n.1, supra. To comply, producers

must expend capital costs reaching millions of dollars associated with abandoning

their current housing systems and installing pens built to the specifications required

by California. Compl. ¶¶ 311-321. Farmers will also bear productivity losses given

the radically altered, less efficient, and less safe animal husbandry practices that

Proposition 12 requires. Id. ¶¶ 322-336. Farmers’ other option will be to dramatically

reduce their sow populations to achieve Proposition 12’s 24 square feet per sow

mandate, significantly damaging their productivity (for example, by 33 percent for

a farmer currently at 16 square feet per sow). Id. ¶¶ 68-70. Sow farmers who reduce

their output so starkly face monetary penalties if they miss shipment targets for hogs,

as well as significantly reduced income. Id. ¶ 71. And farms that raise market hogs

will receive less product from sow farms and will in turn be required to find a new

source of supply or deliver fewer hogs to packers than their contracts require. Many

farmers will be unable to meet the costs of compliance, and will be barred from

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California’s market or even go out of business. Id. ¶¶ 97, 336; see also id. ¶ 58 (c),

(h), (j), (l) (summarizing farmer declarations).

Defendants and HSUS downplay the impact that Proposition 12 has on

interstate commerce by characterizing the burdens as “[f]acilities adjustments” costs

limited to some private companies. Dkt. 19, at 11; see also Dkt. 18-1, at 11. But

Proposition 12 requires the entire pork production industry—in which virtually no

participants currently meet Proposition 12 standards—to completely transform at

enormous capital and operational cost. California and HSUS trivialize the crushing

nature of these costs on producers, which will travel down the supply chain to disrupt

transactions throughout the U.S. and “impair the free flow of materials and products

across state borders.” Nat’l Ass’n of Optometrists & Opticians v. Harris, 682 F.3d

1144, 1155 (9th Cir. 2012).

HSUS dismisses the compliance costs we have identified as speculation, but

there is no basis for doing so besides rank speculation in return. Dkt. 19, at 12

(speculating that plaintiffs’ members might experience operational benefits or

eventually gain market advantage for becoming California-compliant). Plaintiffs’

statements are not based on speculation, but are supported by fact allegations,

member, economist, and trade group declarations, and research, including that:

Compliance with Proposition 12 is not feasible for many farmers across the Nation and will drive them out of the industry. Compl. ¶¶ 94-96.

Proposition 12 bans pork that does not comply with its requirements from the California market. Id. ¶ 97.

For farmers who comply, pork production will decrease as a result of increased sow fatalities, pregnancy terminations, and culling due to increased injuries, or from the need to significantly diminish sow herds. Id. ¶¶ 74-84. Smaller sows herds will mean reduced shipments of hogs to finishing farms and packers—hogs that supply pork meat cuts nationwide. Id. ¶¶ 346-347.

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Producers will have to expend millions in upfront capital costs and

adopt a more labor-intensive method of production. Id. ¶¶ 309-316. They will incur increased production costs, estimated at about $13 per head, which is about a 9.2 per cent increase. Id. ¶ 343.

Farmers “will be required to conform to Proposition 12’s requirements

even for pork product that is bound for other markets” (id. ¶ 347), because “[s]elling a cut from a pig to California means the entire pig must be raised according to Proposition 12’s requirements, regardless of where the other cuts are sold.” Id. ¶ 346.

The production of pork involves “multiple and segmented steps” (id.

¶ 128); “[d]ownstream supply chain participants include processors, brokers, distributors, warehouses, retailers, foodservice operators, and other actors” (id. ¶127), all of which will be affected by increased sow farm costs and reduced production.

“[S]egregating pork product throughout the supply chain” to separate out Proposition 12 pork “is very difficult and complicated.” Id. ¶ 348. It will require “tracing individual cuts of whole pork product

throughout that chain of supply back to particular sow facilities.” Id. ¶ 297. And it will impose costs on pork meat cuts not sold into California. Id. ¶¶ 346-347.

Because of the difficulties of tracing, “some packers and food distributors will require all of the product that they receive to comply with Proposition 12, regardless of where they sell it.” Id. ¶ 349. This

has already been the experience of at least some pork producers. Id. ¶ 350. Producers have received letters from suppliers demanding compliance with Proposition 12. Id. ¶ 337.

These concrete and specific allegations show not only that the costs that flow from

Proposition 12 are massive, but also that they broadly affect the pork production

industry across the Nation and are not tied solely to sales into California. Indeed,

Proposition 12’s stated purpose (§ 2) of “phasing out extreme methods of farm

animal confinement” reveals its promoters’ nationwide aims.

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B. Defendants Misconstrue Or Ignore Plaintiffs’ Well-Pled Allegations.

California’s motion to dismiss ignores our allegations that Proposition 12 has

wholly extraterritorial effects. Its motion is premised on the incorrect

characterization of Proposition 12 as regulating solely in-state sales, being “wholly

indifferent to pork products sold out-of-state,” and only requiring out-of-state

farmers “to alter their production practices with respect to pork they wish to sell in

California.” Dkt. 18-1, at 8-10. That is incorrect. We have explained how

Proposition 12 has practical effects on commerce outside California. That

Proposition 12 is nominally tethered to sales in California does not save it. See

Brown-Forman, 476 U.S. at 520 (the “mere fact that the effects” of a law “are

triggered only by [in-state] sales * * * does not validate the law if it regulates * * *

out-of-state transactions”); Daniels Sharpsmart, Inc. v. Smith, 889 F.3d 608, 615

(9th Cir. 2018) (“[t]he mere fact that some nexus to a state exists will not justify

regulation of wholly out-of-state transactions”).

HSUS insists that Proposition 12’s out-of-state effects are “incidental effects

on how sellers who choose to sell to California buyers produce their goods.” Dkt.

19, at 8. But that again is not what we allege. As described above, we allege that

Proposition 12 directly regulates activities and transactions that have no connection

to California and the housing of sows whose offspring’s meat is sold in part, and

even exclusively, into other states. HSUS acknowledges that laws with “inevitable

effect[s]” on transactions in other states violate the Commerce Clause (id.)—and

such “inevitable” extraterritorial effects are exactly what we allege.

HSUS asserts that some of the out-of-state effects we allege are

“unsubstantiated.” Dkt. 19, at 12 n.7. But that ignores both the applicable legal

standard at this stage of the case and the detailed description of Proposition 12’s

effects in our Complaint and accompanying declarations. HSUS contends that some

of the effects we describe are “a matter between producers and suppliers rather than

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a feature of Prop 12.” Id. That too is incorrect. As explained above, the multi-state

distribution of meat from a single hog (which can be driven by varying regional

demand for different cuts) and the multi-stage pork production process (which is

substantially driven by herd-health considerations as well as efficiency) both mean

that Proposition 12 affects sales of pork meat in other states and transactions among

producers at the different stages of production. Those effects are inevitable

consequences of Proposition 12 as applied to the actual market, actual consumer

demand, and the fact that one hog is butchered into many cuts of meat. The Court

should not consider Proposition 12 in a vacuum or assume that these market

structures and conditions do not exist or are just a matter of commercial convenience.

Particularly given the facts we allege, the cases defendants rely upon are

inapposite. Take Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir.

2013), which upheld California fuel standards that created incentives to reduce

carbon emissions. The statute there did not directly regulate out-of-state conduct: it

set “no threshold [carbon intensity] requirement” against parties reaching the

California market. Id. at 1103 (internal quotation marks omitted). Instead, the statute

“encourage[d]” fuel blenders in California “and the producers who contract with

them” to use cleaner fuels. Id. It regulated “with reference to local harms” (id. at

1104), as carbon dioxide emissions during fuel production harms Californians

regardless of where the carbon dioxide is emitted. Id. at 1081.

The contrast with Proposition 12 is stark. Proposition 12 mandates how out-

of-state farmers must operate, on pain of criminal and civil penalties and banishment

from the California market. And it does so to reduce what it sees as animal cruelty

experienced almost wholly outside of California, not within it. Compared with the

statute in Rocky Mountain, Proposition 12 at its core is not a regulation of in-state

sales to diminish in-state harms; it is a regulation of out-of-state conduct to impose

California’s conception of animal welfare on actors in other states.

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Unlike in Rocky Mountain, moreover, plaintiffs allege facts showing how

Proposition 12 necessarily regulates out-of-state pork production absent the tether

of an in-state sale. Product from one market hog is processed into various cuts that

are distributed into many different markets, such that “producers will be required to

conform to Proposition 12’s requirements even for pork product that is bound for

other markets.” Compl. ¶ 347. And transactions among market participants wholly

outside California will be affected, going well beyond pork destined for California.

See pp. 11-13, supra.

II. PLAINTIFFS HAVE STATED A CLAIM THAT PROPOSITION 12 UNCONSTITUTIONLLY BURDENS INTERSTATE COMMERCE.

Separately, the dormant Commerce Clause forbids states from imposing

burdens on interstate commerce that are clearly excessive when compared with their

putative local benefits. Brown-Forman, 476 U.S. at 579 (quoting Pike, 397 U.S. at

142). Applying that test, courts examine “whether the State’s interest is legitimate

and whether the burden on interstate commerce clearly exceeds the local benefits.”

Id. Relevant burdens include “impacts on commerce beyond the borders” of a state,

and “[i]mpacts that fall more heavily on out-of-state interests.” Pac. Nw. Venison

Prods. v. Smitch, 20 F.3d 1008, 1015 (9th Cir. 1994). State laws that substantially

burden interstate commerce but “cannot be said to make more than the most

speculative contribution to [the State’s interest]” are invalid. Raymond Motor

Transp., Inc. v. Rice, 434 U.S. 429, 447 (1978). That is the case here.

We have alleged, have explained above, and will not repeat here that

Proposition 12 imposes substantial burdens on interstate commerce, introducing

barriers to the free flow of pork and disrupting the entire supply chain. Despite these

steep inhibitions on interstate commerce, Proposition 12 is not supported by any

defensible local interest. See Pike, 397 U.S. at 142.

The ballot initiative fed voters two justifications for Proposition 12: first, that

it prevents foodborne illness; and second, that it addresses animal cruelty. Prop. 12,

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§2. Plaintiffs’ Complaint details how Proposition 12 has no connection to foodborne

illness. Compl. ¶¶ 419-453. Suggesting that the pen size in which a sow is held

during gestation affects the food safety of a product derived from that sow’s

offspring is not defensible. In fact, neither California nor HSUS defend the human

health rationale on which Proposition 12 was sold to voters with regard to pork.5

Instead, California and HSUS focus on what is left: the animal cruelty

justification. While California argues that we “minimize” its animal welfare interest,

the opposite is true. Our Complaint addresses animal welfare extensively and

demonstrates how Proposition 12 does nothing to advance it. Compl. ¶¶ 376-388.

We allege that in fact holding sows in group pens rather than individual pens—and

in larger rather than smaller group pens—exposes sows to increased aggression and

injury, is cruel, and is particularly harmful during the 30 to 40 days after weaning.

Id. ¶¶ 394-401. Dodging these allegations, HSUS suggests that the Court should

defer to Proposition 12’s “policy judgment.” Dkt. 19, at 14. But Proposition 12 is a

ballot initiative, not the product of legislative judgment. “No federal court has

deferred to the terms of a state ballot proposition where the proposition trenches on

a federal constitutional right.” Duncan v. Becerra, 366 F. Supp. 3d 1131, 1167 (S.D.

Cal. 2019), appeal docketed, No. 19-55376 (9th Cir. Apr. 4, 2019).

5 Amici cite a legislative judgment that a different statute governing egg-laying hens may advance a human health interest. Dkt. 25, at 18. That has no bearing on Proposition 12 as applied to breeding pigs. Amici quote a study that does not even hint that the amount of space provided to a sow in gestation affects the fitness for human consumption of a pork product derived from the sow’s offspring. Id. at 18, n. 14. That study instead merely observes that while “[f]ood production has always involved the risk of microbial contamination that can spread disease to humans,” the “scale and methods common to [Industrial Animal Farm Production]” from manure

handling, to transportation, to processing “can significantly affect pathogen contamination.” Pew Comm’n on Industrial Farm Animal Production, Putting Meat on the Table: Industrial Farm Animal Production in America 13 (2008).

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Further, an animal cruelty rationale cannot support Proposition 12 because

this perceived harm is not local. As HSUS acknowledges, almost no commercial

sow breeding occurs in California. Dkt. 19, at 10 n.6. California does not have a

legitimate interest in regulating animal husbandry practices that it believes result in

cruelty on out-of-state farms. A state’s interest lies in mitigating harms within its

borders, not those that take place in other states. See Rocky Mountain Farmers Union

v. Corey, 730 F.3d 1070, 1104 (explaining that California may regulate “with

reference to local harms”). Association des Eleveurs de Canards et d’Oies du

Quebec v. Harris, 729 F.3d 937 (9th Cir. 2013), says nothing different: there the

Court deferred to a legislative judgment that the statute regulated to prevent a local

harm. Id. at 952. There is no such legislative judgment to defer to here.

Proposition 12 is supported by one justification that is indefensible and

another that is illusory and illegitimate and that the ballot initiative itself undermines.

Because it places significant burdens on interstate commerce and its local benefits

are unsupported or illegitimate, Proposition 12 flunks the Pike balancing test.

III. PLAINTIFFS’ ALLEGATIONS DIFFER FROM THOSE IN NAMI.

Plaintiffs bring this case on behalf of farmers to challenge Proposition 12’s

extraterritorial impact on commerce occurring entirely outside California and the

excessive burden that it imposes on the interstate market in hogs and pork. Compl.

¶¶ 291-350. California and HSUS urge the Court to follow the Central District’s

reasoning when it denied a preliminary injunction on the ground that NAMI,

representing the interests of packers, had not shown it was likely to succeed on the

merits of its challenge to Proposition 12’s veal and pork provisions. NAMI v.

Becerra, 2019 WL 6253701 (C.D. Cal. Nov. 22, 2019). The Central District,

however, has more recently denied motions to dismiss and for judgment on the

pleadings as to NAMI’s Pike balancing challenge, emphasizing the different legal

standards applied on motions for preliminary judgment and for dismissal. NAMI v.

Becerra, 2020 WL 919153, at *8–9 (C.D. Cal. Feb. 24, 2020). And although the

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Central District dismissed NAMI’s extraterritoriality claim, it did so without

prejudice to NAMI amending that claim “to allege facts that demonstrate” that

Proposition 12 “regulates conduct that takes place ‘wholly outside’ California.” Id.

at *8.

The Central District’s ruling shows that the motions here should be denied.

Plaintiffs’ allegations describing Proposition 12’s wholly extraterritorial effects on

commerce and the burdens the law imposes on commerce and farmers in other

states—allegations summarized above—are significantly different from those made

in NAMI. Because our Complaint alleges facts that demonstrate that Proposition 12

regulates transactions and conduct wholly outside California, it meets the standard

set forth by the Central District for pleading an extraterritoriality claim.6 And we

allege both that the asserted local “benefits” of Proposition 12 are illusory or

insubstantial, and that the burdens on interstate commerce, including on commerce

and farmers wholly outside California, substantially outweigh any “benefits.” By

analogy to NAMI, California’s and HSUS’s motions should be denied.7

6 Plaintiffs specifically allege that Proposition 12 imposes wholly extraterritorial

regulation on how cuts of pork sold outside California are produced, how transactions in hogs not destined, or wholly destined, for California must be conducted, and how sow farms raising hogs not destined for California will need to operate. Proposition 12 disrupts, we allege, the entire chain of production of a product sold nationwide. Accordingly, the Central District’s observation that mere “‘upstream effects’” of local laws on actors in other states are not “‘necessarily extraterritorial’” (2020 WL 919153, at *7) is not relevant here. By contrast, there was no showing in Ass’n des Eleveurs de Canards et d’Oies du Quebec v. Harris,

729 F.3d 937 (9th Cir. 2013), that the ban on foie gras sales into California regulated wholly out-of-state transactions. The statute banned foie gras from California if the livers sold there were produced by force-feeding, but the ban on force feeding had no effect on other products derived from the duck. Id. at 945–46. There was no such showing of extraterritorial effect in Rocky Mountain either. See pp. 20-21, supra. 7 The NAMI court expressed the view that the extraterritoriality doctrine applies only “to cases involving price-setting statues.” 2020 WL 919153, at *7. That did not stop the court from suggesting that an amended complaint alleging real extraterritorial regulation —like plaintiffs’ Complaint here—would survive dismissal, even though

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* * *

Defendants may dispute our allegations that Proposition 12 has direct extra-

territorial effects and imposes substantial burdens on commerce that vastly outweigh

its local benefits, but those are plausible allegations backed by plaintiffs’ knowledge

of and research into the industry in which many of their members participate, by

discussions with farmers, packers, and experts, and by the declarations that

accompany the Complaint. Accepting defendants’ contrary suggestion that

Proposition 12 is concerned only with in-state sales would require ignoring our fact

allegations and making inferences in the light least favorable to plaintiffs. Plaintiffs

are entitled to have the opportunity to prove their allegations in further proceedings.

CONCLUSION

Defendants’ Motion to Dismiss and Defendant-Intervenors’ Motion for

Judgment on the Pleadings should be denied.

Proposition 12 does not involve price fixing. In any event, the court’s premise is incorrect. The Ninth Circuit, en banc, has applied the extraterritoriality principle outside of price-fixing. Sam Francis Found. v. Christies, Inc., 784 F.3d 1320, 1324-

25 & n.1 (2015) (applying “the simple, well established constitutional rule summarized in Healy”); see also Publius v. Boyer-Vine, 237 F. Supp. 3d 997, 1024 (E.D. Cal. 2017). The Supreme Court has applied the doctrine to a statute governing securities transactions. Edgar v. MITE Corp., 457 U.S. 624, 643 (1982) (plurality opinion). And other circuits have applied it in diverse contexts. E.g., Ass’n for Accessible Meds. v. Frosh, 887 F.3d 664, 670 (4th Cir. 2018) (rejecting argument that Healy rule applies only to price control statutes), cert. denied, 139 S. Ct. 1168 (2019); Legato Vapors, 847 F.3d at 836 (striking down statute regulating product

manufacture and distribution as extraterritorial); N. Dakota v. Heydinger, 825 F.3d 912, 920 (8th Cir. 2016) (Eighth Circuit applies doctrine outside price fixing context).

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Respectfully submitted,

Dated: February 28, 2020 MAYER BROWN LLP

TIMOTHY S. BISHOP* DAN HIMMELFARB* COLLEEN M. CAMPBELL* C. MITCHELL HENDY By: s/ C. Mitchell Hendy C. Mitchell Hendy E-mail: [email protected] Attorneys for Plaintiffs *admitted pro hac vice

MAYER BROWN LLP TIMOTHY S. BISHOP (IL 6198062)

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