1 MAYER BROWN LLP TIMOTHY S. BISHOP (IL 6198062) (pro hac vice) 2 [email protected] 71 S. Wacker Drive 3 Chicago, Illinois 60606 Telephone: (312) 782-0600 4 Facsimile: (312) 701-7711

5 MAYER BROWN LLP C. MITCHELL HENDY (SBN 282036) 6 [email protected] 350 South Grand Avenue 25th Floor 7 Los Angeles, California 90071-1503 Telephone: (213) 229-9500 8 Facsimile: (213) 625-0248 Attorneys for Plaintiffs National 9 Producers Council & American Farm Bureau Federation 10 (continued on following page) 11 UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA 12 NATIONAL PORK PRODUCERS No. 3:19-cv-02324-W-AHG 13 COUNCIL & AMERICAN FARM BUREAU FEDERATION, PLAINTIFFS’ OPPOSITION TO 14 MOTIONS TO DISMISS AND Plaintiffs, FOR JUDGMENT ON THE 15 PLEADINGS v. 16 NO ORAL ARGUMENT KAREN ROSS, in her official capacity PURSUANT TO LOCAL RULE 17 as Secretary of the California Department of Food and Agriculture, 18 Date: March 23, 2020 SONIA ANGELL, in her official Courtroom: 3C capacity as Director of the California 19 Judge: Hon. Thomas J. Whelan Department of Public Health, and Trial Date: None set XAVIER BECERRA, in his official 20 Action Filed: Dec. 5, 2019 capacity as Attorney General of California, 21 Defendants, 22 THE HUMANE SOCIETY OF THE 23 UNITED STATES; ANIMAL LEGAL DEFENSE FUND; ANIMAL 24 EQUALITY; THE HUMANE LEAGUE; FARM SANCTUARY; 25 COMPASSION IN WORLD FARMING USA; and COMPASSION 26 OVER KILLING, 27 Defendants-Intervenors. 28

PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 Additional Counsel for Plaintiffs

2 MAYER BROWN LLP DAN HIMMELFARB (D.C. 978889) (pro hac vice) 3 COLLEEN M. CAMPBELL(D.C. 219082) (pro hac vice) [email protected] 4 [email protected] 1999 K. Street NW 5 Washington, D.C. 20006 Telephone: (202) 263-3000 6 Facsimile: (202) 263-3300

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

i PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 TABLE OF CONTENTS Page 2 TABLE OF AUTHORITIES ...... iii 3 INTRODUCTION ...... 1 BACKGROUND ...... 2 4 A. Proposition 12 ...... 2 5 B. Implementation Of Proposition 12 ...... 3 6 C. The Pork Supply Chain...... 4 D. Sow Housing Practices ...... 5 7 E. Procedural History ...... 6 8 LEGAL STANDARD ...... 7 9 ARGUMENT ...... 7 I. PLAINTIFFS HAVE STATED A CLAIM THAT PROPOSITION 12 10 UNCONSTITUTIONALLY PROJECTS CALIFORNIA’S REGUL- ATORY REGIME INTO OTHER STATES...... 9 11 A. Proposition 12 Violates The Extraterritoriality Principle 12 Because It Controls Commerce Outside Of California’s Borders...... 10 13 1. Proposition 12 substantially affects sales of pork meat between non-California parties...... 11 14 2. Proposition 12 substantially affects transactions among 15 market participants that have nothing to do with California...... 11 16 3. Proposition 12 cannot be enforced without California intruding deeply into farm operations in other states...... 13 17 4. Proposition 12 unlawfully balkanizes hog production...... 14 18 5. The huge costs of complying with Proposition 12 exacerbate its extraterritorial effects...... 16 19 B. Defendants Misconstrue Or Ignore Plaintiffs’ Well-Pled 20 Allegations...... 19 II. PLAINTIFFS HAVE STATED A CLAIM THAT PROPOSITION 12 21 UNCONSTITUTIONLLY BURDENS INTERSTATE COMMERCE. .... 21 22 III. PLAINTIFFS’ ALLEGATIONS DIFFER FROM THOSE IN NAMI...... 23 CONCLUSION ...... 25 23 24 25 26 27 28

ii PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 TABLE OF AUTHORITIES 2 Page(s) 3 Cases 4 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...... 7 5 Ass’n for Accessible Meds. v. Frosh, 6 887 F.3d 664 (4th Cir. 2018)...... 25 7 Association des Eleveurs de Canards et d’Oies du Quebec v. Harris, 729 F.3d 937 (9th Cir. 2013)...... 23, 24 8 Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 9 476 U.S. 573 (1986) ...... 9, 19, 21 10 C. & A. Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383 (1994) ...... 8 11 Daniels Sharpsmart, Inc. v. Smith, 12 889 F.3d 608 (9th Cir. 2018)...... 19 13 Dean Milk Co. v. City of Madison, 340 U.S. 349 (1951) ...... 15 14 Duncan v. Becerra, 15 366 F. Supp. 3d 1131 (S.D. Cal. 2019) ...... 22 16 Edgar v. MITE Corp., 457 U.S. 624 (1982) (plurality opinion)...... 8, 10, 25 17 Granholm v. Heald, 18 544 U.S. 460...... 15 19 Gregg v. Haw. Dep’t of Pub. Safety, 870 F.3d 883 (9th Cir. 2017)...... 7 20 Healy v. Beer Inst., Inc., 21 491 U.S. 324 (1989) ...... passim 22 Kassel v. Consol. Freightways Corp., 450 U.S. 662 (1981) ...... 9 23 Legato Vapors LLC v. Cook, 24 847 F.3d 825 (7th Cir. 2017)...... passim 25 N. Dakota v. Heydinger, 825 F.3d 912 (8th Cir. 2016)...... 25 26 NAMI v. Becerra, 27 2019 WL 6253701, No. 2:19-8569-CAS (C.D. Cal. Nov. 22, 2019) ...... 6, 23 28

iii PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 NAMI v. Becerra, 2020 WL 919153, No. 2:19-8569-CAS (C.D. Cal. Feb. 24, 2020)...... 6, 23, 24 2 Nat’l Ass’n of Optometrists & Opticians v. Harris, 3 682 F.3d 1144 (9th Cir. 2012) ...... 17 4 Or. Waste Sys., Inc. v. Dep’t of Envtl. Quality of Or., 511 U.S. 93 (1994) ...... 7 5 Pac. Nw. Venison Prods. v. Smitch, 6 20 F.3d 1008 (9th Cir. 1994)...... 21 7 Pike v. Bruce Church, Inc., 397 U.S. 137 (1970) ...... passim 8 Publius v. Boyer-Vine, 9 237 F. Supp. 3d 997 (E.D. Cal. 2017) ...... 24 10 In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130 (9th Cir. 2017) ...... 7 11 Raymond Motor Transp., Inc. v. Rice, 12 434 U.S. 429 (1978) ...... 21 13 Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 2013) ...... 20, 23, 24 14 Sam Francis Found. v. Christies, Inc., 15 784 F.3d 1320 (2015) ...... 25 16 Statutes, Rules and Regulations 17 An Act to Prevent Cruelty to Farm Animals, 2016 Mass. Acts 333 ...... 15 18 Cal. Health & Saf. Code § 25990 ...... 3 19 Cal. Health & Saf. Code § 25991 ...... 2, 3, 6, 14 20 Cal. Health & Saf. Code § 25993(a) ...... 3 21 Cal. Bus. & Prof. Code § 17200 ...... 3 22 Ohio Admin. Code 901:12-8-02(G)(4), (5) ...... 15 23 Other Authorities 24 CDFA, Draft Article 5. Certification and Accredited Certifiers (Dec. 25 23, 2019), https://www.cdfa.ca.gov/ahfss/pdfs/ Article5Certification DRAFT12232019.pdf ...... 4, 13, 14 26 Pew Comm’n on Industrial Farm Animal Production, Putting Meat on 27 the Table: Industrial Farm Animal Production in America (2008) ...... 22 28 U.S. Const. art. I, § 8, cl. 3 ...... 7

iv PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 INTRODUCTION 2 California produces hardly any pork. Compl. ¶¶ 16-19. But California 3 residents consume 13% of the pork eaten in the U.S. Id. ¶ 20. As a result, California 4 imports huge quantities of pork raised in other states. The offspring of around 5 673,000 sows is required annually to satisfy California consumers’ demand for pork 6 meat—yet only about 1,500 sows are commercially bred in California. Id. ¶¶ 18-20. 7 Proposition 12 imposes California’s preferred animal husbandry methods on the 8 producers of all these out-of-state raised . Furthermore, because pork is a 9 complex national market, in which most hogs are not bred for a single state’s market 10 and each hog is butchered into many cuts of meat that are shipped to different buyers 11 all across the country, Proposition 12 in fact regulates the housing of far more sows 12 than that. Its requirements—which are met only by a tiny fraction of sow farms— 13 substantially interfere with a complex nationwide market served by thousands of 14 farmers and are not confined to pork sold in California. Id. ¶¶ 279-304, 342-347. 15 And policing Proposition 12 inevitably inserts California’s regulatory tentacles deep 16 into farms and plants beyond its boundaries. Id. ¶¶ 58, 73-92. 17 Proposition 12 does all that to serve two “benefits” that were touted to voters. 18 Compl. ¶ 268. One—human health—is so illusory that the State and the intervenor 19 animal rights activists now decline to defend it. Dkt. 18-1, at 12 n.6; Dkt. 19, at 14- 20 15. The other—preventing animal cruelty—is so unsupported by facts (indeed, 21 contradicted by them) that it cannot justify the enormous burdens Proposition 12 22 imposes on nationwide commerce in pork. 23 Because of its direct extraterritorial effects, and also because its burdens on 24 interstate commerce easily outweigh any benefits it might have, Proposition 12 25 violates the Commerce Clause and should, as to pork, be enjoined. Defendants’ 26 arguments that plaintiff National Pork Producers Council’s and American Farm 27 Bureau Federation’s Complaint should be dismissed play fast and loose with the 28 Rule 12 standards and rest on an incorrect understanding of our allegations and of

PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 the law. Defendants’ Motion to Dismiss and Defendant-Intervenors’ Motion for 2 Judgment on the Pleadings should be denied and this case allowed to proceed to 3 develop the facts about California’s extraterritorial law and the burdens it imposes. 4 BACKGROUND 5 A. Proposition 12 6 Drafted and sponsored by animal rights activists, Proposition 12 is a ballot 7 initiative passed in November 2018. See Prevention of Cruelty to Farm Animals Act, 8 Prop. 12 (Nov. 6, 2018). It amends the California Health and Safety Code by 9 redefining supposedly “cruel” animal confinement for covered farm animals, 10 including, as relevant here, breeding pigs. Id. §§ 3, 4(e). Proposition 12 purports to 11 “prevent animal cruelty by phasing out extreme methods of farm animal 12 confinement, which also threaten the health and safety of California consumers, and 13 increase the risk of foodborne illness and associated negative fiscal impacts on the 14 State of California.” Id. § 2. Proposition 12 is an outlier: “the strongest law of its 15 kind in the world,” according to the Animal Legal Defense Fund. See 16 https://perma.cc/J7T5-98XP. 17 Proposition 12 governs housing standards for “breeding [s],” defined as 18 female pigs kept for commercial breeding that are “six months or older or pregnant.” 19 Cal. Health & Saf. Code § 25991(a). Commonly called “sows,” these pigs give birth 20 to the market hogs that provide the vast majority of pork meat. Compl. ¶¶ 8-9. Sows 21 themselves make up only a very small portion of pigs slaughtered for meat—and 22 most sow meat is sold cooked, processed, or in combination products and therefore 23 is not covered by Proposition 12, which governs sales of uncooked whole cuts of 24 pork. Id. ¶ 10; Cal. Health & Saf. Code § 25991(u). 25 Proposition 12 bans sales of covered pork meat in California when the seller 26 knows or should know that it came from a sow confined in a manner that Proposition 27 12 prohibits or from the offspring of such a sow. Id. § 25990(b)(2). Proposition 12 28 forbids housing a sow “in a manner that prevents the animal from lying down,

2 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 standing up, fully extending the animal’s limbs, or turning around freely.” Id., 2 §§ 25990(a); 25991(e)(1). This “stand-up turn-around” requirement effectively 3 requires sows be held in group pens rather than in individual pens, because 4 individual pens designed to hold one sow apiece do not allow sows to turn around, 5 for hygiene, safety, and caretaking reasons. Compl. ¶¶ 15, 24. After December 31, 6 2021, Proposition 12 in addition forbids housing a sow “with less than 24 square feet 7 of useable floor space per pig.” Cal. Health & Saf. Code §§ 25990(a); 25991(e)(3).1 8 Proposition 12 permits narrow exclusions from its confinement requirements, 9 including for five days before a breeding pig gives birth (or “farrows”) and while it 10 is nursing piglets (for about 21 days); for animal husbandry during very limited time 11 intervals; for veterinary purposes; for medical research; and during transportation, 12 shows, or slaughter. Id. § 25992(a)-(g). 13 A sale of pork in California that does not comply with Proposition 12 is a 14 criminal offense punishable by a $1,000 fine and 180 days in prison. Id. § 25993(b). 15 A violation also subjects a seller to a civil action for damages or injunctive relief 16 under California Business & Professional Code Section 17200. Id. 17 B. Implementation Of Proposition 12 18 Proposition 12 directed the California Department of Food and Agriculture 19 (“CDFA”) and Department of Public Health (“CDPH”) to produce final 20 implementing regulations by September 1, 2019. Cal. Health & Saf. Code 21 § 25993(a). The agencies missed that deadline, but CDFA has explained on its 22 webpage that it is considering verifying compliance with Proposition 12 through 23 audits and certification of farms. Compl. ¶ 302. An indicator of what those 24 25 1 Proposition 12’s requirements expand those imposed by a prior ballot initiative, 26 Proposition 2, titled Standards for Confining Farm Animals, which was also 27 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 28 January 1, 2015, providing six years for California farmers to come into compliance.

3 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 regulations might look like is CDFA’s pre-proposal draft rules governing certifi- 2 cation of egg-production facilities as “California compliant operation[s].” CDFA, 3 Draft Article 5. Certification and Accredited Certifiers (Dec. 23, 2019), 4 https://www.cdfa.ca.gov/ahfss/pdfs/Article5CertificationDRAFT12232019.pdf 5 (“Draft Article 5”). Those regulations contemplate highly intrusive inspections and 6 certification of out-of-state farms by agents of California. Id.2 7 C. The Pork Supply Chain 8 Across the United States, some 65,000 farmers market about 125 million hogs 9 per year for gross sales of $26 billion annually. Compl. ¶ 111. Although pigs are 10 raised across the country, sow farms are heavily concentrated in the Midwest and 11 North Carolina. Id. ¶ 5. Very little pork is produced in California—only a small 12 fraction of 1 percent of the State’s substantial pork consumption, which is estimated 13 at about 13 percent of the total U.S. market. Id. ¶¶ 18-20. 14 Commerce in pork is complex and segmented. Multiple steps, transactions, 15 and actors are involved between the time when a is born on a sow farm and 16 when a cut of pork meat reaches the ultimate consumer. Compl. ¶¶ 7, 127-128. 17 At the beginning of the supply chain, sows housed on breeding farms give 18 birth to piglets, which are generally moved to nursery farms after weaning at about 19

20 2 Section 1326.1 would provide that “authorized representatives of [CDFA]” must be given inspection “access to the production or handling operation, including 21 noncertified production and handling areas,” “offices,” and “pastures, fields, 22 equipment, structures, and houses where covered animals and covered animal 23 products may be kept, produced, processed, handled, stored or transported, including * * * all enclosures for covered animals,” and must be allowed “to examine all 24 covered products that are sold or intended, held, segregated, stored, packaged, 25 labeled, or represented for sale or distribution,” and all “containers, labels, labeling, invoices, and bills of lading used in the handling, storage, packaging, sale, 26 transportation or distribution of covered products,” as well as be given access “for 27 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 28 certification of their operations. See id.

4 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 21 days. Compl. ¶ 142.3 At six to eight weeks, piglets have grown into “feeder pigs” 2 and are commonly transferred again to separate facilities. Id. ¶ 143. After 16 to 17 3 weeks at a finishing farm, pigs are sent to packer-slaughter facilities. Id. ¶ 144. Many 4 hog farmers sell their market hogs to packers through years-long supply agreements. 5 Id. ¶ 126. Packers slaughter and the market hogs and sell their pork to 6 wholesalers or retailers, which then distribute it to consumers. Id. ¶ 124. While some 7 operations are vertically integrated so that one company handles multiple steps (id. 8 ¶ 123), supply chain participants often include independent farmers, “processors, 9 brokers, distributors, warehouses, retailers, [and] food-service operators.” Id. ¶ 127. 10 D. Sow Housing Practices 11 About 72% of U.S. pork producers house their sows in individual pens 12 throughout gestation. Compl. ¶ 286. Most individual pens provide around 14 square 13 feet per sow and do not allow the sow to turn around, and so do not comply with 14 Proposition 12. Id. ¶ 152 & Ex. O, ¶ 11. Farmers use pens to provide a sow with 15 individual access to water and feed without competition or aggression from other 16 sows. Id. ¶¶ 156-57. This reduces animal stress, injury, and mortality rates on farms, 17 and protects workers. Id. ¶¶ 74-90, 159, 394-95. 18 The remainder of farmers house sows in group pens that generally provide 19 around 16 to 18 square feet per sow and so do not comply with Proposition 12’s 24 20 square feet per sow requirement. Compl. ¶ 162. Of the roughly 28% of farmers that 21 use group housing, almost all nevertheless rely on individual breeding pens for the 22 30 to 40 days between the time a sow finishes weaning a litter through the time it 23 enters estrus, is re-bred, and pregnancy is confirmed—a practice that does not 24 comply with Proposition 12. Id. ¶¶ 79-82, 287. Farmers use breeding pens during 25 this period to assist with animal husbandry, provide sows with nutrition tailored to 26 3 27 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 28 disease. Compl. ¶¶ 140-142.

5 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 their needs after weaning, protect sows against the loss of pregnancy or a drop in 2 litter size due to aggression from other sows, and protect workers. Id. ¶¶ 79-90, 181- 3 206. 4 Farmers house young, unbred pigs (called “gilts”) separately, most commonly 5 in group pens with less space per pig because gilts are smaller than mature sows. 6 Compl. ¶ 92. Farmers breed gilts for the first time when they are about seven months 7 old, which means that Proposition 12’s requirements bar the sale in California of 8 meat from gilts’ subsequent offspring. Id. ¶¶ 92, 244-249; Cal. Health & Saf. Code 9 § 25991(a) (only gilts under six months excluded from Proposition 12 requirements). 10 E. Procedural History 11 Plaintiffs filed this lawsuit on December 5, 2019, to enjoin the enforcement 12 of Proposition 12 as applied to pork raised outside California and obtain a 13 declaration that it violates the dormant Commerce Clause. Plaintiffs contend that 14 Proposition 12 impermissibly regulates extraterritorially and also excessively 15 burdens interstate commerce compared with its putative local benefits. Animal rights 16 activists led by the Humane Society of the United States (collectively, “HSUS”) filed 17 a Motion to Intervene as defendants on December 18, 2019, which was granted on 18 January 9, 2020. On January 10, 2020, California filed a Motion to Dismiss, and 19 HSUS filed a Motion for Judgment on the Pleadings.4 20

21 4 On October 4, 2019, the North American Meat Institute (“NAMI”), which 22 represents packers, filed a lawsuit challenging Proposition 12’s standards for veal 23 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. 24 2019). The Central District denied NAMI’s Motion for a Preliminary Injunction. 25 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 26 State’s motion to dismiss NAMI’s claim that Proposition 12 violates the Commerce 27 Clause because its burdens on interstate commerce outweigh its local benefits, but dismissed NAMI’s extraterritoriality claim, without prejudice to amending the 28 complaint. 2020 WL 919153. Those rulings are addressed in part III, infra.

6 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 LEGAL STANDARD 2 To survive a motion to dismiss, a complaint need only contain “sufficient 3 factual matter, accepted as true, to ‘state a claim to relief that is plausible on its 4 face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. 5 Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the 6 plaintiff pleads factual content that allows the court to draw the reasonable inference 7 that the defendant is liable for the misconduct alleged.” Id. “[A]ll allegations of 8 material fact [should be taken] as true and construe[d] * * * in the light most 9 favorable to the nonmoving party.” In re Quality Sys., Inc. Sec. Litig., 865 F.3d 1130, 10 1140 (9th Cir. 2017) (internal quotation marks omitted). The same standard applies 11 to a motion for judgment on the pleadings. Gregg v. Haw. Dep’t of Pub. Safety, 870

12 F.3d 883, 887 (9th Cir. 2017). 13 ARGUMENT 14 Plaintiffs oppose these motions because plaintiffs have sufficiently pled that 15 Proposition 12 violates the Commerce Clause. Plaintiffs have alleged that 16 Proposition 12 has direct extraterritorial effects, and also imposes burdens on 17 interstate commerce that outweigh any benefits it might have. Defendants’ and 18 HSUS’ arguments to the contrary distort Rule 12 standards and rest on incorrect 19 understandings of our allegations and of the law. The legal principles that govern 20 plaintiffs’ claims are well established. 21 Extraterritorial regulation. The Commerce Clause grants Congress the power 22 “[t]o regulate Commerce with foreign Nations, and among the several States.” U.S. 23 Const. art. I, § 8, cl. 3. “The Framers granted Congress plenary authority over 24 interstate commerce in ‘the conviction that in order to succeed, the new Union would 25 have to avoid the tendencies toward economic Balkanization that had plagued 26 relations among the Colonies and later among the States under the Articles of 27 Confederation.’” Or. Waste Sys., Inc. v. Dep’t of Envtl. Quality of Or., 511 U.S. 93, 28 98 (1994) (quoting Hughes v. Oklahoma, 441 U.S. 322, 325–26 (1979)). This

7 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 affirmative grant of power to Congress “has long been understood to have a 2 ‘negative’ aspect that denies the States the power unjustifiably to * * * burden the 3 interstate flow of articles of commerce.” Id. That includes state laws that have the 4 “practical effect” of governing “commerce that takes place wholly outside of the 5 State’s borders, whether or not the commerce has effects within the State.” Healy v. 6 Beer Inst., Inc., 491 U.S. 324, 336 (1989) (internal quotation marks omitted). A state 7 law with the practical effect of regulating extraterritorially violates the “dormant” 8 Commerce Clause “regardless of whether the statute’s extraterritorial reach was 9 intended by the legislature.” Id. 10 Accordingly, the Commerce Clause bars the “projection of one state 11 regulatory regime into the jurisdiction of another State.” Healy, 491 U.S. at 337. A 12 state may not “attach restrictions to * * * imports in order to control commerce in 13 other States” because that “would extend the [State’s] police power beyond its 14 jurisdictional bounds.” C. & A. Carbone, Inc. v. Town of Clarkstown, 511 U.S. 383, 15 393 (1994). When the practical effect of a law is to “regulate directly * * * interstate 16 commerce, including commerce wholly outside the State, it must be held invalid.” 17 Edgar v. MITE Corp., 457 U.S. 624, 643 (1982) (plurality opinion); see Healy, 491 18 U.S. at 336 (under “our cases concerning the extraterritorial effects of state economic 19 regulation,” the “critical inquiry is whether the practical effect of the regulation is to 20 control conduct beyond the boundaries of the State”). 21 “[T]he practical effect of the statute” is to “be evaluated not only by 22 considering the consequences of the statute itself, but also by considering how the 23 challenged statute may interact with the legitimate regulatory regimes of other 24 States.” Healy, 491 U.S. at 336. This extraterritoriality principle reflects “[t]he 25 Constitution’s special concern both with the maintenance of a national economic 26 union unfettered by state-imposed limitations on interstate commerce and with the 27 autonomy of the individual States within their respective spheres.” Id. at 335–36. 28

8 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 Excessive burden. A law also violates the dormant Commerce Clause when 2 “the burden imposed on [interstate] commerce is clearly excessive in relation to the 3 putative local benefits.” Pike v. Bruce Church, Inc., 397 U.S. 137, 142 (1970). A 4 state law that significantly impairs interstate commerce to serve a state interest that 5 is illegitimate or illusory “cannot be harmonized with the Commerce Clause.” Kassel 6 v. Consol. Freightways Corp., 450 U.S. 662, 670–71 (1981) (plurality opinion). 7 Proposition 12 fails both of these tests. By regulating and policing out-of-state 8 farming practices, including the production of pork that is not sold into California, 9 Proposition 12 projects California’s police power into other states and infringes on 10 other states’ ability to regulate animal husbandry within their own borders. 11 Proposition 12 also imposes burdens on the interstate market in pork that are 12 excessive in light of its illusory or insubstantial local benefits. On both of those 13 grounds, it is unconstitutional and should be struck down. Certainly, plaintiffs 14 detailed allegations and supporting declarations are sufficient to survive defendants’ 15 motions at this stage and to warrant further factual development of their claims. 16 I. PLAINTIFFS HAVE STATED A CLAIM THAT PROPOSITION 12 UNCONSTITUTIONALLY PROJECTS CALIFORNIA’S REGUL- 17 ATORY REGIME INTO OTHER STATES. 18 Plaintiffs have stated a claim that Proposition 12 violates the extraterritoriality 19 principle of the dormant Commerce Clause by directly regulating commerce 20 occurring in other states. Proposition 12 has the sort of breathtaking extraterritorial 21 reach, controlling “the design and operation of out-of-state production facilities,” 22 that led the Seventh Circuit to strike down an Indiana law in Legato Vapors LLC v. 23 Cook, 847 F.3d 825, 827 (7th Cir. 2017). And it interferes far more directly with 24 interstate commerce than the laws upheld by the Ninth Circuit in decisions upon 25 which defendants rely. A statute that directly regulates interstate commerce is 26 “generally struck down.” Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 27 476 U.S. 573, 579 (1986). 28

9 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 A. Proposition 12 Violates The Extraterritoriality Principle Because It Controls Commerce Outside Of California’s Borders. 2 3 All parties agree: the relevant legal question is whether Proposition 12 directly 4 regulates conduct that occurs in other states. Dkt. 19, at 8 n.5; see also Dkt. 18-1, at 5 8 (law violates extraterritoriality when it “regulate[s] transactions occurring entirely 6 out-of-state”). Defendants’ contention that Proposition 12 affects activities and 7 transactions solely in California (Dkt 18-1, at 8-9; Dkt. 19, at 7) is contradicted by 8 our allegations that Proposition 12 has the inevitable practical effect of controlling 9 wholly out-of-state conduct. Those plausible allegations must be credited. 10 To begin at the simplest level, California consumes 13 percent of pork sold in 11 the U.S., and the vast majority of that pork—more than 99 per cent—comes from 12 hogs raised in other states. Dkt. 19, at 10 n.6; Compl. ¶¶ 16-17, 20. As a result, 13 Proposition 12 necessarily regulates the conduct of the predominantly Midwestern 14 farmers who raise the hundreds of thousands of sows whose offspring provide pork 15 sold into California. In other words, California’s huge market for pork meat runs 16 almost entirely on out-of-state farmers, and so does Proposition 12. 17 But Proposition 12’s reach into out-of-state commercial transactions goes far 18 deeper than even these numbers disclose: it directly affects transactions that have 19 nothing to do with California. Proposition 12 effectively regulates transactions and 20 conduct that occur wholly within other states, and the production of pork that is not 21 sold into California. See Edgar v. MITE Corp., 457 U.S. at 642 (striking down 22 Illinois law with “sweeping extraterritorial effect” because it applied to transactions 23 that “would not affect a single Illinois shareholder”); Legato Vapors, 847 F.3d at 24 837 (striking down Indiana law that “directly regulates the production facilities and 25 processes of out-of-state manufacturers and thus wholly out-of-state commercial 26 transactions”). That is so for a number of distinct reasons. 27 28

10 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 1. Proposition 12 substantially affects sales of pork meat between non-California parties. 2 3 For the most part, wholesalers and retailers in California sell, and Californians 4 buy, individual cuts of pork meat, not whole hogs. Market hogs are butchered at out- 5 of-state plants into pork cuts of many different types—both Proposition 12-covered 6 whole cuts and other cuts that are processed or sold in “combination food products” 7 and so are not covered (Compl. ¶¶ 254-257)—and those cuts are then distributed 8 throughout the country. Id. ¶ 96. If any covered meat at all from a hog is sold into 9 California, the sow it comes from must have been raised in conformity with 10 Proposition 12. Id. ¶ 346. As a result, all non-California buyers of any pork from 11 offspring of that sow necessarily buy Proposition 12 compliant pork—whether there 12 is any demand for it in those states or not (id. ¶ 347)—with the additional cost that 13 entails for farmers, packers, and consumers. 14 Proposition 12 imposes enormous compliance costs on farmers (Compl. 15 ¶¶ 305-342); per pig production costs will increase by 9.2 percent or $13 a head. Id. 16 ¶ 343. And there is no possibility that all cuts from all Proposition 12 compliant pigs 17 will be sold into California, though it is California’s regulations that cause those 18 huge cost increases. Thus the entire national market, including countless sellers and 19 buyers entirely outside California, will in practice, and inevitably, be adversely 20 affected by Proposition 12, and wholly out-of-state markets will be disrupted. 21 In short, California imposes its costly sow housing mandates on the whole 22 hog, even though parts of the hog’s meat will be sold into other states. That direct 23 effect on millions of transactions occurring wholly outside of California is forbidden 24 by the Commerce Clause’s bar on extraterritorial regulation.

25 2. Proposition 12 substantially affects transactions among market participants that have nothing to do with California. 26 27 Proposition 12 also distorts transactions among market participants outside 28 California and that effect will not be tied to whether a cut of pork meat is ultimately

11 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 destined for California. In the vast majority of cases, it is not the farmers caring for 2 sows that directly sell pork into California. Many other actors and transactions are 3 involved in a complex, nationwide, multi-step supply chain. Compl. ¶ 127. Retailers 4 and wholesalers who sell pork meat in California usually receive it from packers and 5 slaughterhouses (id. ¶¶ 126-127), who in turn receive hogs from finishing farms (id. 6 ¶¶ 130, 144), who in turn may receive feeder pigs from nurseries (id. ¶ 142), who in 7 turn may receive piglets from sow farms. Id. ¶ 143. Proposition 12 stands to impact 8 all of these out-of-state transactions, as up-stream actors force farmers at the 9 different stages of production to segment their supply (a requirement that many 10 producers will not be able to meet), or produce all their pigs to Proposition 12’s 11 specifications, or simply end the business relationship. Id. ¶¶ 297-300, 336-339. 12 For example, compliance with Proposition 12 will mean tracking pork meat 13 back to a particular sow’s housing, which means tracing and segregating Proposition 14 12-compliant market hogs throughout the stages described above. Compl. ¶ 297. 15 That tracking and segregating of hogs will be necessary regardless of what portion 16 of the meat from a hog eventually is sold in California, and even if most of it is sold 17 elsewhere. 18 Alternatively, to avoid complex tracing and segregation—and to reflect the 19 fact that a farmer is almost always uncertain at the time a piglet is farrowed where 20 its meat will eventually be sold—packers or other purchasers may demand that 21 farmers produce all of their hogs in compliance with Proposition 12. Again, that 22 means farmers will need to comply with Proposition 12 for hogs only partially or 23 not at all destined for California markets. Compl. ¶¶ 298-299. This extraterritorial 24 effect is not hypothetical: some buyers have already demanded that their hog 25 suppliers meet California’s specifications for all products they buy. Id. ¶ 300. 26 Thus, as plaintiffs allege, Proposition 12 has an impermissible extraterritorial 27 effect because sow farms will be required to comply with Proposition 12 for all their 28 animals, or they will need to apply tracing and segregation to animals raised in

12 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 compliance with Proposition 12 even when many cuts from those animals will go to 2 other states. Compl. ¶¶ 297, 301. That is a direct effect on conduct and transactions 3 having nothing to do with California.

4 3. Proposition 12 cannot be enforced without California intruding deeply into farm operations in other states. 5 6 In addition, California’s enforcement of Proposition 12 will necessarily 7 involve extraterritorial regulation. CDFA has said that it is considering direct field 8 verification audits or inspections. Those audits and inspections by State agents will 9 occur almost entirely on out-of-state farms, many of which supply hogs that are 10 ultimately sold as pork cuts to many different states. Compl. ¶ 302. While regulations 11 implementing Proposition 12 for pork have not yet been adopted, CDFA has 12 published a draft proposal for egg product compliance that relies on inspection and 13 monitoring. See p.4 n.2, supra. That draft sheds light on the likely framework for 14 enforcing Proposition 12 as to pork products—indeed, it is hard to imagine how 15 California could police Proposition 12 other than through some type of on-the- 16 ground audit of out-of-state farms. 17 The breadth of the enforcement power that CDFA thinks it needs to police 18 Proposition 12 is astonishing. Under the Proposition 12 egg proposal, “authorized 19 representatives of the [CDFA]”—agents of the State of California—would demand 20 access to out-of-state sow farms to inspect every aspect of “the production or 21 handling operation, including noncertified production and handling areas” (i.e., 22 including areas with no claim to be Proposition 12 compliant and supplying eggs 23 destined for other states), as well as “offices,” and “pastures, fields, equipment, 24 structures, and houses where covered animals and covered animal products may be 25 kept, produced, processed, stored or transported.” See Draft Article 5; Cal. Health & 26 Saf. Code § 25991(f) (“‘[c]overed animal’ means any * * * breeding pig * * * who 27 is kept on a farm”) (emphasis added). California agents would also assert the right 28 to examine “all covered products that are sold or intended, held, segregated, stored,

13 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 packaged, labeled, or represented for sale or distribution,” and all “containers, labels, 2 labeling, invoices, and bills of lading used in the handling, storage, packaging, sale, 3 transportation or distribution of covered products” (i.e., including, inevitably, 4 products and paperwork with no connection to sales into California). Draft Article 5 5. California would also require out-of-state farmers to keep detailed records to 6 facilitate its inspection and certification of their operations. See id. 7 More intrusive regulation of business property located in another state and 8 going well beyond products and activities to be sold into California is hard to 9 imagine. A less intrusive audit scheme was held to violate the Commerce Clause in 10 Legato Vapors, where the Seventh Circuit explained that Indiana’s “audits and on- 11 site inspections of out-of-state manufacturers are invalid direct regulations of 12 interstate commerce insofar as they relate to enforcement of Indiana’s requirements 13 for facility design and production operations.” 847 F.3d at 836. The same type of 14 flaw should lead to the same result here.

15 4. Proposition 12 unlawfully balkanizes hog production. 16 Proposition 12’s extraterritorial overreach is reflected in its intrusion into 17 other states’ ability to regulate animal husbandry practices inside their own borders. 18 When determining whether a statute operates extraterritorially, courts consider “how 19 the challenged statute may interact with the legitimate regulatory regimes of other 20 States” and “what effect would arise if not one, but many or every, State adopted 21 similar legislation.” Healy, 491 U.S. at 336. In particular, a state law has an 22 impermissible extraterritorial effect when it places out-of-state businesses at risk of 23 inconsistent regulation. Id.; see also Legato Vapors, 847 F.3d at 834 (holding that 24 “the threat of inconsistent regulation, not inconsistent regulation in fact,” is 25 sufficient to show unlawful extraterritoriality, and striking down an Indiana statute 26 where other states had adopted “their own distinct regulatory regimes” with “less 27 stringent” requirements). 28

14 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 That risk is present here. States whose conceptions of “animal cruelty” differ 2 from California’s could impose competing definitions that give rise to different or 3 even conflicting sow housing standards. For example, states may allow or even 4 require use of an individual breeding pen to promote animal welfare in 5 circumstances where breeding stalls could not be used under Proposition 12. Indeed, 6 Ohio has passed regulations that recognize the utility of breeding pens to animal 7 welfare at times when Proposition 12 would not allow them. See Ohio Admin. Code 8 901:12-8-02(G)(4), (5) (permitting use of breeding pens during post-weaning “to

9 maximize embryonic welfare and allow[] for the confirmation of pregnancy”). Other 10 states may recognize 24 square feet as too much space for optimum sow welfare and 11 prescribe a smaller figure. See Compl. ¶¶ 382-388. A mosaic of state standards 12 would inhibit a well-functioning interstate market and “create just the kind of 13 competing and interlocking local economic regulation that the Commerce Clause 14 was meant to preclude.” Healy, 491 U.S. at 337. 15 HSUS acknowledges that the risk of additional regulation is imminent, not 16 speculative. As HSUS explains it, Proposition 12 has galvanized other states to pass 17 legislation. Dkt. 19, at 4 (citing Oregon and Washington regulations with respect to 18 eggs). Massachusetts voters have already adopted legislation that exports stand-up 19 turn-around requirements for breeding pigs into other states. See An Act to Prevent 20 Cruelty to Farm Animals, 2016 Mass. Acts 333. As states cordon off their markets, 21 granting access only to out-of-state producers who implement their prescribed 22 animal welfare standards, the “multiplication of preferential trade areas” will be 23 “destructive of the very purpose of the Commerce Clause.” Dean Milk Co. v. City of 24 Madison, 340 U.S. 349, 356 (1951); see also Granholm v. Heald, 544 U.S. 460, 472- 25 73 (“proliferation of trade zones is prevented” by the constitutional prohibition on 26 extraterritorial regulation). For this reason too, Proposition 12 should be enjoined. 27 28

15 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 5. The huge costs of complying with Proposition 12 exacerbate its extraterritorial effects. 2 3 The new costs imposed on businesses at every stage of pork production cannot 4 be confined to a California-only bucket: the entire national market in pork is affected 5 by the enormous expenditures Proposition 12 requires. Those costs are exported 6 throughout the national economy because hogs are raised nationwide (principally 7 outside California), pork production for nationwide sales depends on countless 8 transactions between non-California market participants, and the sale of cuts from a 9 single hog are rarely confined to a single state. The very size of the new costs 10 guarantees nationwide market distortions, especially given the specific out-of-state 11 effects described above. 12 To comply with Proposition 12, pork producers must incur transition costs 13 that are particularly steep given the expedited time period to come into compliance 14 (Compl. Ex. C, ¶ 10), compared with the six years that California farmers were 15 granted to comply with Proposition 2. See p.3, n.1, supra. To comply, producers 16 must expend capital costs reaching millions of dollars associated with abandoning 17 their current housing systems and installing pens built to the specifications required 18 by California. Compl. ¶¶ 311-321. Farmers will also bear productivity losses given 19 the radically altered, less efficient, and less safe animal husbandry practices that 20 Proposition 12 requires. Id. ¶¶ 322-336. Farmers’ other option will be to dramatically 21 reduce their sow populations to achieve Proposition 12’s 24 square feet per sow 22 mandate, significantly damaging their productivity (for example, by 33 percent for 23 a farmer currently at 16 square feet per sow). Id. ¶¶ 68-70. Sow farmers who reduce 24 their output so starkly face monetary penalties if they miss shipment targets for hogs, 25 as well as significantly reduced income. Id. ¶ 71. And farms that raise market hogs 26 will receive less product from sow farms and will in turn be required to find a new 27 source of supply or deliver fewer hogs to packers than their contracts require. Many 28 farmers will be unable to meet the costs of compliance, and will be barred from

16 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 California’s market or even go out of business. Id. ¶¶ 97, 336; see also id. ¶ 58 (c), 2 (h), (j), (l) (summarizing farmer declarations). 3 Defendants and HSUS downplay the impact that Proposition 12 has on 4 interstate commerce by characterizing the burdens as “[f]acilities adjustments” costs 5 limited to some private companies. Dkt. 19, at 11; see also Dkt. 18-1, at 11. But 6 Proposition 12 requires the entire pork production industry—in which virtually no 7 participants currently meet Proposition 12 standards—to completely transform at 8 enormous capital and operational cost. California and HSUS trivialize the crushing 9 nature of these costs on producers, which will travel down the supply chain to disrupt 10 transactions throughout the U.S. and “impair the free flow of materials and products 11 across state borders.” Nat’l Ass’n of Optometrists & Opticians v. Harris, 682 F.3d 12 1144, 1155 (9th Cir. 2012). 13 HSUS dismisses the compliance costs we have identified as speculation, but 14 there is no basis for doing so besides rank speculation in return. Dkt. 19, at 12 15 (speculating that plaintiffs’ members might experience operational benefits or 16 eventually gain market advantage for becoming California-compliant). Plaintiffs’ 17 statements are not based on speculation, but are supported by fact allegations, 18 member, economist, and trade group declarations, and research, including that: 19  Compliance with Proposition 12 is not feasible for many farmers across 20 the Nation and will drive them out of the industry. Compl. ¶¶ 94-96. 21  Proposition 12 bans pork that does not comply with its requirements 22 from the California market. Id. ¶ 97. 23  For farmers who comply, pork production will decrease as a result of 24 increased sow fatalities, pregnancy terminations, and culling due to increased injuries, or from the need to significantly diminish sow herds. 25 Id. ¶¶ 74-84. Smaller sows herds will mean reduced shipments of hogs 26 to finishing farms and packers—hogs that supply pork meat cuts nationwide. Id. ¶¶ 346-347. 27 28

17 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1  Producers will have to expend millions in upfront capital costs and adopt a more labor-intensive method of production. Id. ¶¶ 309-316. 2 They will incur increased production costs, estimated at about $13 per 3 head, which is about a 9.2 per cent increase. Id. ¶ 343. 4  Farmers “will be required to conform to Proposition 12’s requirements 5 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 6 must be raised according to Proposition 12’s requirements, regardless 7 of where the other cuts are sold.” Id. ¶ 346. 8  The production of pork involves “multiple and segmented steps” (id. 9 ¶ 128); “[d]ownstream supply chain participants include processors, brokers, distributors, warehouses, retailers, foodservice operators, and 10 other actors” (id. ¶127), all of which will be affected by increased sow 11 farm costs and reduced production. 12  “[S]egregating pork product throughout the supply chain” to separate out Proposition 12 pork “is very difficult and complicated.” Id. ¶ 348. 13 It will require “tracing individual cuts of whole pork product 14 throughout that chain of supply back to particular sow facilities.” Id. ¶ 297. And it will impose costs on pork meat cuts not sold into 15 California. Id. ¶¶ 346-347. 16  Because of the difficulties of tracing, “some packers and food 17 distributors will require all of the product that they receive to comply 18 with Proposition 12, regardless of where they sell it.” Id. ¶ 349. This has already been the experience of at least some pork producers. Id. 19 ¶ 350. Producers have received letters from suppliers demanding 20 compliance with Proposition 12. Id. ¶ 337. 21 These concrete and specific allegations show not only that the costs that flow from 22 Proposition 12 are massive, but also that they broadly affect the pork production 23 industry across the Nation and are not tied solely to sales into California. Indeed, 24 Proposition 12’s stated purpose (§ 2) of “phasing out extreme methods of farm 25 animal confinement” reveals its promoters’ nationwide aims. 26 27 28

18 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 B. Defendants Misconstrue Or Ignore Plaintiffs’ Well-Pled Allegations. 2 3 California’s motion to dismiss ignores our allegations that Proposition 12 has 4 wholly extraterritorial effects. Its motion is premised on the incorrect 5 characterization of Proposition 12 as regulating solely in-state sales, being “wholly 6 indifferent to pork products sold out-of-state,” and only requiring out-of-state 7 farmers “to alter their production practices with respect to pork they wish to sell in 8 California.” Dkt. 18-1, at 8-10. That is incorrect. We have explained how 9 Proposition 12 has practical effects on commerce outside California. That 10 Proposition 12 is nominally tethered to sales in California does not save it. See 11 Brown-Forman, 476 U.S. at 520 (the “mere fact that the effects” of a law “are 12 triggered only by [in-state] sales * * * does not validate the law if it regulates * * * 13 out-of-state transactions”); Daniels Sharpsmart, Inc. v. Smith, 889 F.3d 608, 615 14 (9th Cir. 2018) (“[t]he mere fact that some nexus to a state exists will not justify 15 regulation of wholly out-of-state transactions”). 16 HSUS insists that Proposition 12’s out-of-state effects are “incidental effects 17 on how sellers who choose to sell to California buyers produce their goods.” Dkt. 18 19, at 8. But that again is not what we allege. As described above, we allege that 19 Proposition 12 directly regulates activities and transactions that have no connection 20 to California and the housing of sows whose offspring’s meat is sold in part, and 21 even exclusively, into other states. HSUS acknowledges that laws with “inevitable 22 effect[s]” on transactions in other states violate the Commerce Clause (id.)—and 23 such “inevitable” extraterritorial effects are exactly what we allege. 24 HSUS asserts that some of the out-of-state effects we allege are 25 “unsubstantiated.” Dkt. 19, at 12 n.7. But that ignores both the applicable legal 26 standard at this stage of the case and the detailed description of Proposition 12’s 27 effects in our Complaint and accompanying declarations. HSUS contends that some 28 of the effects we describe are “a matter between producers and suppliers rather than

19 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 a feature of Prop 12.” Id. That too is incorrect. As explained above, the multi-state 2 distribution of meat from a single hog (which can be driven by varying regional 3 demand for different cuts) and the multi-stage pork production process (which is 4 substantially driven by herd-health considerations as well as efficiency) both mean 5 that Proposition 12 affects sales of pork meat in other states and transactions among 6 producers at the different stages of production. Those effects are inevitable 7 consequences of Proposition 12 as applied to the actual market, actual consumer 8 demand, and the fact that one hog is butchered into many cuts of meat. The Court 9 should not consider Proposition 12 in a vacuum or assume that these market 10 structures and conditions do not exist or are just a matter of commercial convenience. 11 Particularly given the facts we allege, the cases defendants rely upon are 12 inapposite. Take Rocky Mountain Farmers Union v. Corey, 730 F.3d 1070 (9th Cir. 13 2013), which upheld California fuel standards that created incentives to reduce 14 carbon emissions. The statute there did not directly regulate out-of-state conduct: it 15 set “no threshold [carbon intensity] requirement” against parties reaching the 16 California market. Id. at 1103 (internal quotation marks omitted). Instead, the statute 17 “encourage[d]” fuel blenders in California “and the producers who contract with 18 them” to use cleaner fuels. Id. It regulated “with reference to local harms” (id. at 19 1104), as carbon dioxide emissions during fuel production harms Californians 20 regardless of where the carbon dioxide is emitted. Id. at 1081. 21 The contrast with Proposition 12 is stark. Proposition 12 mandates how out- 22 of-state farmers must operate, on pain of criminal and civil penalties and banishment 23 from the California market. And it does so to reduce what it sees as animal cruelty 24 experienced almost wholly outside of California, not within it. Compared with the 25 statute in Rocky Mountain, Proposition 12 at its core is not a regulation of in-state 26 sales to diminish in-state harms; it is a regulation of out-of-state conduct to impose 27 California’s conception of animal welfare on actors in other states. 28

20 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 Unlike in Rocky Mountain, moreover, plaintiffs allege facts showing how 2 Proposition 12 necessarily regulates out-of-state pork production absent the tether 3 of an in-state sale. Product from one market hog is processed into various cuts that 4 are distributed into many different markets, such that “producers will be required to 5 conform to Proposition 12’s requirements even for pork product that is bound for 6 other markets.” Compl. ¶ 347. And transactions among market participants wholly 7 outside California will be affected, going well beyond pork destined for California. 8 See pp. 11-13, supra.

9 II. PLAINTIFFS HAVE STATED A CLAIM THAT PROPOSITION 12 UNCONSTITUTIONLLY BURDENS INTERSTATE COMMERCE. 10 11 Separately, the dormant Commerce Clause forbids states from imposing 12 burdens on interstate commerce that are clearly excessive when compared with their 13 putative local benefits. Brown-Forman, 476 U.S. at 579 (quoting Pike, 397 U.S. at 14 142). Applying that test, courts examine “whether the State’s interest is legitimate 15 and whether the burden on interstate commerce clearly exceeds the local benefits.” 16 Id. Relevant burdens include “impacts on commerce beyond the borders” of a state, 17 and “[i]mpacts that fall more heavily on out-of-state interests.” Pac. Nw. Venison 18 Prods. v. Smitch, 20 F.3d 1008, 1015 (9th Cir. 1994). State laws that substantially 19 burden interstate commerce but “cannot be said to make more than the most 20 speculative contribution to [the State’s interest]” are invalid. Raymond Motor 21 Transp., Inc. v. Rice, 434 U.S. 429, 447 (1978). That is the case here. 22 We have alleged, have explained above, and will not repeat here that 23 Proposition 12 imposes substantial burdens on interstate commerce, introducing 24 barriers to the free flow of pork and disrupting the entire supply chain. Despite these 25 steep inhibitions on interstate commerce, Proposition 12 is not supported by any 26 defensible local interest. See Pike, 397 U.S. at 142. 27 The ballot initiative fed voters two justifications for Proposition 12: first, that 28 it prevents foodborne illness; and second, that it addresses animal cruelty. Prop. 12,

21 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 §2. Plaintiffs’ Complaint details how Proposition 12 has no connection to foodborne 2 illness. Compl. ¶¶ 419-453. Suggesting that the pen size in which a sow is held 3 during gestation affects the food safety of a product derived from that sow’s 4 offspring is not defensible. In fact, neither California nor HSUS defend the human 5 health rationale on which Proposition 12 was sold to voters with regard to pork.5 6 Instead, California and HSUS focus on what is left: the animal cruelty 7 justification. While California argues that we “minimize” its animal welfare interest, 8 the opposite is true. Our Complaint addresses animal welfare extensively and 9 demonstrates how Proposition 12 does nothing to advance it. Compl. ¶¶ 376-388. 10 We allege that in fact holding sows in group pens rather than individual pens—and 11 in larger rather than smaller group pens—exposes sows to increased aggression and 12 injury, is cruel, and is particularly harmful during the 30 to 40 days after weaning. 13 Id. ¶¶ 394-401. Dodging these allegations, HSUS suggests that the Court should 14 defer to Proposition 12’s “policy judgment.” Dkt. 19, at 14. But Proposition 12 is a 15 ballot initiative, not the product of legislative judgment. “No federal court has 16 deferred to the terms of a state ballot proposition where the proposition trenches on 17 a federal constitutional right.” Duncan v. Becerra, 366 F. Supp. 3d 1131, 1167 (S.D. 18 Cal. 2019), appeal docketed, No. 19-55376 (9th Cir. Apr. 4, 2019). 19 20

21 5 Amici cite a legislative judgment that a different statute governing egg-laying hens 22 may advance a human health interest. Dkt. 25, at 18. That has no bearing on 23 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 24 human consumption of a pork product derived from the sow’s offspring. Id. at 18, n. 25 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 26 “scale and methods common to [Industrial Animal Farm Production]” from manure 27 handling, to transportation, to processing “can significantly affect pathogen contamination.” Pew Comm’n on Industrial Farm Animal Production, Putting Meat 28 on the Table: Industrial Farm Animal Production in America 13 (2008).

22 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 Further, an animal cruelty rationale cannot support Proposition 12 because 2 this perceived harm is not local. As HSUS acknowledges, almost no commercial 3 sow breeding occurs in California. Dkt. 19, at 10 n.6. California does not have a 4 legitimate interest in regulating animal husbandry practices that it believes result in 5 cruelty on out-of-state farms. A state’s interest lies in mitigating harms within its 6 borders, not those that take place in other states. See Rocky Mountain Farmers Union 7 v. Corey, 730 F.3d 1070, 1104 (explaining that California may regulate “with 8 reference to local harms”). Association des Eleveurs de Canards et d’Oies du 9 Quebec v. Harris, 729 F.3d 937 (9th Cir. 2013), says nothing different: there the 10 Court deferred to a legislative judgment that the statute regulated to prevent a local 11 harm. Id. at 952. There is no such legislative judgment to defer to here. 12 Proposition 12 is supported by one justification that is indefensible and 13 another that is illusory and illegitimate and that the ballot initiative itself undermines. 14 Because it places significant burdens on interstate commerce and its local benefits 15 are unsupported or illegitimate, Proposition 12 flunks the Pike balancing test. 16 III. PLAINTIFFS’ ALLEGATIONS DIFFER FROM THOSE IN NAMI. 17 Plaintiffs bring this case on behalf of farmers to challenge Proposition 12’s 18 extraterritorial impact on commerce occurring entirely outside California and the 19 excessive burden that it imposes on the interstate market in hogs and pork. Compl. 20 ¶¶ 291-350. California and HSUS urge the Court to follow the Central District’s 21 reasoning when it denied a preliminary injunction on the ground that NAMI, 22 representing the interests of packers, had not shown it was likely to succeed on the 23 merits of its challenge to Proposition 12’s veal and pork provisions. NAMI v. 24 Becerra, 2019 WL 6253701 (C.D. Cal. Nov. 22, 2019). The Central District, 25 however, has more recently denied motions to dismiss and for judgment on the 26 pleadings as to NAMI’s Pike balancing challenge, emphasizing the different legal 27 standards applied on motions for preliminary judgment and for dismissal. NAMI v. 28 Becerra, 2020 WL 919153, at *8–9 (C.D. Cal. Feb. 24, 2020). And although the

23 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 Central District dismissed NAMI’s extraterritoriality claim, it did so without 2 prejudice to NAMI amending that claim “to allege facts that demonstrate” that 3 Proposition 12 “regulates conduct that takes place ‘wholly outside’ California.” Id. 4 at *8. 5 The Central District’s ruling shows that the motions here should be denied. 6 Plaintiffs’ allegations describing Proposition 12’s wholly extraterritorial effects on 7 commerce and the burdens the law imposes on commerce and farmers in other 8 states—allegations summarized above—are significantly different from those made 9 in NAMI. Because our Complaint alleges facts that demonstrate that Proposition 12 10 regulates transactions and conduct wholly outside California, it meets the standard 11 set forth by the Central District for pleading an extraterritoriality claim.6 And we 12 allege both that the asserted local “benefits” of Proposition 12 are illusory or 13 insubstantial, and that the burdens on interstate commerce, including on commerce 14 and farmers wholly outside California, substantially outweigh any “benefits.” By 15 analogy to NAMI, California’s and HSUS’s motions should be denied.7 16 17 6 Plaintiffs specifically allege that Proposition 12 imposes wholly extraterritorial regulation on how cuts of pork sold outside California are produced, how 18 transactions in hogs not destined, or wholly destined, for California must be 19 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 20 product sold nationwide. Accordingly, the Central District’s observation that mere 21 “‘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 22 was no showing in Ass’n des Eleveurs de Canards et d’Oies du Quebec v. Harris, 23 729 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 24 livers sold there were produced by force-feeding, but the ban on force feeding had 25 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. 26 7 The NAMI court expressed the view that the extraterritoriality doctrine applies only 27 “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 28 regulation —like plaintiffs’ Complaint here—would survive dismissal, even though 24 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 * * * 2 Defendants may dispute our allegations that Proposition 12 has direct extra- 3 territorial effects and imposes substantial burdens on commerce that vastly outweigh 4 its local benefits, but those are plausible allegations backed by plaintiffs’ knowledge 5 of and research into the industry in which many of their members participate, by 6 discussions with farmers, packers, and experts, and by the declarations that 7 accompany the Complaint. Accepting defendants’ contrary suggestion that 8 Proposition 12 is concerned only with in-state sales would require ignoring our fact 9 allegations and making inferences in the light least favorable to plaintiffs. Plaintiffs 10 are entitled to have the opportunity to prove their allegations in further proceedings. 11 CONCLUSION 12 Defendants’ Motion to Dismiss and Defendant-Intervenors’ Motion for 13 Judgment on the Pleadings should be denied.

14 15 16 17 18

19 Proposition 12 does not involve price fixing. In any event, the court’s premise is 20 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- 21 25 & n.1 (2015) (applying “the simple, well established constitutional rule 22 summarized in Healy”); see also Publius v. Boyer-Vine, 237 F. Supp. 3d 997, 1024 23 (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 24 opinion). And other circuits have applied it in diverse contexts. E.g., Ass’n for 25 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 26 (2019); Legato Vapors, 847 F.3d at 836 (striking down statute regulating product 27 manufacture and distribution as extraterritorial); N. Dakota v. Heydinger, 825 F.3d 912, 920 (8th Cir. 2016) (Eighth Circuit applies doctrine outside price fixing 28 context).

25 PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG

1 2 Respectfully submitted,

3 Dated: February 28, 2020 MAYER BROWN LLP 4 TIMOTHY S. BISHOP* DAN HIMMELFARB* 5 COLLEEN M. CAMPBELL* C. MITCHELL HENDY 6 By: s/ C. Mitchell Hendy 7 C. Mitchell Hendy 8 E-mail: [email protected] Attorneys for Plaintiffs 9 *admitted pro hac vice 10

11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

PLAINTIFFS’ OPP. TO MOTIONS TO DISMISS AND FOR JUDGMENT ON THE PLEADINGS CASE NO. 3:19-cv-02324-W-AHG