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The California Cage Fight

08:33AM Dec 06, 2014

Should one state government be able to regulate farming practices in other states to protect the economic viability of its farmers? Under the U.S. Constitution’s Commerce Clause, the answer is generally “no.” California has passed such a law, which could have dramatic implications for agriculture. However, in this case, it has proven difficult to get a chance to pose this question in federal court.

When California’s voters passed Proposition 2, its animal housing ballot initiative, in 2008, it created a quandary for the state’s egg farmers. The initiative, backed by the Humane Society of the U.S. (HSUS), required California farmers to increase the amount of space allotted to egg-laying hens by Jan. 1, 2015. While California has a robust egg industry, Proposition 2 would make it nearly impossible to compete with cheaper eggs imported from states not subject to the same animal housing requirements. Without an intervention, California’s egg industry would all but vanish.

Enter Assembly Bill (A.B.) 1437. Passed into law by California’s legislature in 2010, it required all shelled eggs imported into the state to be produced by hens in facilities that meet California’s housing requirements. This measure helped level the playing field for California’s egg producers while wreaking havoc on the out-of-state egg companies that ship 4 billion eggs per year to the Golden State. Producers will have to choose whether they take on added costs and reduced efficiencies and continue to ship eggs to California or forego sales to the state altogether.

One of the lessons learned by our short-lived experiment with the Articles of Confederation was that states will, if left to their own devices, hamstring interstate trade to protect their in-state businesses. That is why the framers wrote the Commerce Clause to provide Congress authority to regulate interstate commerce. (Courts have since inferred the Commerce Clause also stands for the proposition that, with a few exceptions, states cannot substantially interfere with interstate trade.)

California claims its imported shelled egg law is justified based on studies showing incidences of Salmonella are lessened if hens have additional cage space. However, these studies are not conclusive and are disputed within the poultry science community. Furthermore, California’s own legislative records plainly state A.B. 1437 is designed to “level the playing field so that in-state producers are not disadvantaged” by Proposition 2. This matter is ripe for a lawsuit to prevent California from establishing de facto national animal housing standards. 

Laws such as A.B. 1437 inject chaos into our industry, increasing costs that are then passed along to consumers. However, it is unclear whether this matter will be decided by a federal court.

HSUS has, to this point, been effective at tamping down efforts to overturn A.B. 1437. Egg companies, when compared to other farming operations, are typically large and oftentimes have substantial contracts with major grocers and restaurants. These contracts, which represent the difference between viability and bankruptcy, can be imperiled by public relations campaigns by activist groups such as HSUS. Thus, to this point, no egg company has taken a stand to challenge the constitutionality of A.B 1437.

This summer, six-egg producing states filed suit against California to challenge A.B. 1437 on behalf of the egg farmers residing in their borders. The judge held these states did not have “standing” to sue and dismissed the case. 

As of press time, the decision over “standing” is being appealed. It is not apparent any court will address the constitutionality of the law before it goes into effect. This is a shame and sets a bad precedent for other states to follow.

This column is not a substitute for legal advice.