The United States Supreme Court is generally asked to hear approximately 7,000 to 8,000 cases each year but only grants review and hears approximately 80 of these cases. And many of the cases the Court reviews involve appeals in criminal cases and other high profile constitutional issues. Given the small number of cases heard and the breadth of the issues those cases generally involve, it is unusual in most years for the Supreme Court to decide cases that will directly impact farming operations.
But this year was an exception to this general trend. In its most recent term from October 2022 through June 2023, the Supreme Court heard and decided two cases that are significant to farmers: (1) National Pork Producers Council v. Ross (i.e., the Proposition 12 case); and (2) Sackett v. Environmental Protection Agency (i.e., the Waters of the United States, or WOTUS, case). This article will summarize these important decisions and their likely impact on your farming operations.
CALIFORNIA PROPOSITION 12 – NATIONAL
PORK PRODUCERS COUNCIL V. ROSS
In November 2018, California voters passed a ballot initiative known as Proposition 12, which generally prohibits a business from “knowingly engag[ing] in the sale within California” of pork that the business “knows or should know is the meat of a [breeding pig] who was confined in a cruel manner, or is the meat of immediate offspring of a [breeding pig] who was confined in a cruel manner.” The law provides that a breeding pig is “confined in a cruel manner” if it cannot lie down, stand up, fully extend its limbs, or turn around freely (i.e., without touching the side of its pen or another pig) or, after December 31, 2021, if it has “less than 24 square feet of usable floorspace per pig.” As a practical matter, Proposition 12 directly regulates the manner in which hog farmers in other states (and other countries) manage their sow farms. And the regulations California has adopted to enforce this law would require sow farms around the world to register with the State of California and subject their farms to inspections by an agent of the State of California at least annually.
The National Pork Producers Council and American Farm Bureau Federation challenged Proposition 12, arguing that it violates the Dormant Commerce Clause in the United States Constitution. The federal district court for the Southern District of California dismissed the challenge to Proposition 12 on the face of the National Pork Producers Council’s complaint, and the Ninth Circuit Court of Appeals affirmed that dismissal. The Supreme Court granted review and issued its decision on May 11, 2023. In a decision that Justice Kavanaugh charitably described as “fractured,” a bare majority of the Court (five justices) affirmed the dismissal of the National Pork Producers Council’s complaint even though a majority could not agree on the reason for the dismissal.
What is the Dormant Commerce Clause?
An examination of this case must begin with a general summary of the Dormant Commerce Clause. The Constitution grants Congress the power “to regulate commerce with foreign nations, and among the several states, and with the Indian tribes.” This provision is known as the Commerce Clause. In a long line of cases, the Supreme Court has interpreted the Commerce Clause to not only grant power to Congress to regulate commerce, but also to restrict the power of states to adopt certain laws that regulate commerce. This implied restriction on the power of states is known as the Dormant Commerce Clause.
The Supreme Court’s Dormant-Commerce-Clause decisions fall into a couple of categories. First, the Court has struck down state laws that, on their face, directly discriminate against business from other states. For example, in Baldwin v. G. A. F. Seelig, Inc., the Court struck down New York laws that prohibited out-of-state dairy farmers from selling their milk in New York for a price that was less than the minimum price that New York law guaranteed to its in-state producers. The Court held these laws violated the Dormant Commerce Clause because they “ ‘plainly discriminate[d]’ against out-of-staters by ‘erecting an economic barrier protecting a major local industry against competition from without the State.’ ”
In other cases where an intent to discriminate against out-of-state businesses is not apparent on the face of the law, the Court has applied a balancing test that looks at the practical effects of the challenged law. In Pike v. Bruce Church, Inc., the Court considered an Arizona order requiring that cantaloupes grown in the state must be processed and packaged in the state. The Court recognized that the state order, on its face, regulated in-state and out-of-state business in an even-handed manner to achieve a legitimate local public interest. But the Court held that such a law may nonetheless violate the Dormant Commerce Clause based on its “practical effects” if “the burden imposed on [interstate] commerce is clearly excessive in relation to the putative local benefits.” This standard has become known as the Pike balancing test.
What did the Supreme Court decide in this case?
The National Pork Producers Council first challenged the constitutionality of Proposition 12 on its face. Although it conceded that Proposition 12 does not discriminate between California hog farmers and out-of-state hog farmers, the National Pork Producers Council argued that Proposition 12 violates the Dormant Commerce Clause because the law, on its face, only regulates commerce that occurs outside of California. The Supreme Court characterized this argument as an effort to adopt a new standard that would expand the scope of the Dormant Commerce Clause, and the Court unanimously rejected this argument.
The National Pork Producers Council also argued that Proposition 12 violates the Dormant Commerce Clause under the Pike balancing test. With respect to this issue, four justices (Justices Gorsuch, Thomas, Sotomayor, and Kagan) held that the district court properly dismissed the National Pork Producers Council’s claim because the complaint did not sufficiently plead facts indicating that Proposition 12 imposes “substantial burdens” on interstate commerce.” But four justices (Chief Justice Roberts and Justices Alito, Kavanaugh, and Jackson) disagreed and concluded that the National Pork Producers Council’s complaint had sufficiently alleged facts showing a substantial burden on interest commerce. Accordingly, these justices would have reversed the dismissal and sent the case back to the lower courts to balance these burdens on interstate commerce against the purported local benefits of the law.
This four-to-four tie was broken by Justice Barrett, who (along with Justices Gorsuch and Thomas) concluded that it is impossible for a court to balance the purely economic costs imposed on pork producers by Proposition 12 against the purported noneconomic benefits of the law. These justices would have effectively eliminated the Pike balancing tests and allowed states to impose their noneconomic moral preferences on the marketplace as long as those states impose those requirements equally on in-state and out-of-state businesses. Thus, these justices would have affirmed the dismissal of these claims, but on broader grounds than the procedural defects found by the four-justice plurality who held that the National Pork Producers Council did not sufficiently allege a substantial burden on interstate commerce.
What is the practical effect of this decision?
The practical effect of the Supreme Court’s decision in National Pork Producers Council v. Ross is that this specific case has been dismissed and is dead. But because the dismissal was based on narrow procedural grounds—i.e., that the National Pork Producers Council did not allege sufficient facts to show a substantial burden on interstate commerce—this decision did not determine that Proposition 12 is constitutional on the merits and does not directly impact other legal challenges to the law.
In particular, the Iowa Pork Producers Association filed a separate lawsuit challenging Proposition 12 in the Central District of California. This lawsuit included broader allegations and claims under the Dormant Commerce Clause and also challenged the law under other legal theories (many of which were identified by Justice Kavanaugh, in his dissenting opinion, as alternative reasons that Proposition 12 may be unconstitutional). The federal district court dismissed this lawsuit before the Supreme Court agreed to hear the National Pork Producers Council’s case, and the appeal of this dismissal was stayed until the Supreme Court issued its decision. That appeal will now move forward.
Additionally, Triumph Foods and its members recently filed a lawsuit challenging a Massachusetts law that is similar to California’s Proposition 12. Triumph Foods’ claims are also broader than the allegations made by the National Pork Producers Council and assert that the Massachusetts law discriminates against out-of-state pork producers and violates both the Dormant Commerce Clause and other constitutional provisions. This lawsuit will also move forward.
In the meantime, however, the requirements of California Proposition 12 are now in effect, and all pork sold into California as of July 1, 2023, must meet the space and turnaround requirements imposed by the law (pork products that were purchased and in inventory prior to July 1, 2023, may still be sold through the end of this year). Further, hog farmers who will sell pigs that may be used to produce pork products to be sold in California must be certified by January 1, 2024.
WATERS OF THE UNITED STATES – SACKETT V. ENVIRONMENTAL PROTECTION AGENCY
The Environmental Protection Agency’s regulatory authority under the Clean Water Act is generally limited to “navigable waters,” which is broadly defined to mean “the waters of the United States, including the territorial seas.” The inherent ambiguity of these terms resulted in significant litigation (the Supreme Court addressed the issue multiple times over the past 40 years) and several rulemaking proceedings since 2015. This regulatory background, including the new WOTUS rule that was published by the Biden administration earlier this year, was discussed in the Federal Regulatory Update in our last issue of Dirt.
On May 25, 2023, the United States Supreme Court issued its decision in Sackett v. Environmental Protection Agency that finally resolves this protracted controversy. In 2004, Michael and Chantell Sackett purchased a small lot in Idaho and began backfilling the property with dirt and rocks to build a house. A few months later, the Environmental Protection Agency ordered the Sacketts to restore the property to its original condition because the property contained wetlands that the EPA determined were protected by the Clean Water Act.
The wetlands on the Sackett’s property were on the other side of a road from an “unnamed tributary” that feeds into a nonnavigable creek, which itself feeds into Priest Lake (which the EPA designated as “traditionally navigable”). The EPA found that the wetlands were “waters of the United States,” and thus subject to the EPA’s regulatory authority under the Clean Water Act, because the wetlands (when combined with other nearby wetlands) had a “significant nexus” with traditional navigable waters.
In Sackett, the Supreme Court squarely rejected the broad definition of waters of the United States that the Environmental Protection Agency applied. The Court also, for the first time, adopted a clear definition of this term. First, the Court held that the term “waters of the United States” “encompasses ‘only those relatively permanent standing or continuously flowing bodies of water forming geographical features that are described as streams, oceans, rivers, and lakes.’ ” And although this term also includes some wetlands that are “adjacent” to such waters, only those wetlands that have “a continuous surface connection with that water, making it difficult to determine where the ‘water’ ends and the ‘wetland’ begins,” may be deemed to be “waters of the United States.” Because the wetlands on the Sackett’s property did not meet this definition, the Court held that the EPA did not have authority to regulate the Sackett’s wetlands under the Clean Water Act.
The Sackett decision significantly reduces the scope of the Environmental Protection Agency’s regulatory authority under the Clean Water Act. This limitation is significant to livestock farmers because the Clean Water Act prohibits a discharge of pollutants to “waters of the United States” from a “point source” without an NPDES permit and because a Concentrated Animal Feeding Operation (i.e., a feedlot that confines 700 or more mature dairy cattle, 1,000 or more beef cattle or cow/calf pairs, 2,500 swine weighing more than 55 pounds, or 55,000 or more turkeys, among others) is a “point source” under the Act. Thus, Sackett narrows the number of feedlots that may require a federal NPDES permit. And although some of these feedlots in Minnesota will still require a similar SDS permit, the limitation on the EPA’s authority gives producers more flexibility to consider which permit is best for a particular operation.