In this brief note, we provide a summary of the Prop 12 legal framework, the Supreme Court's opinion, CDFA's recent guidance, as well as our take on its implications for the food industry.

In more detail

Prop 12 in a nutshell

Prop 12, also known as the Farm Animal Confinement Initiative, was a ballot measure passed by California voters in November 2018. The law establishes new minimum space requirements for certain farm animals and prohibits the sale of meat and eggs in California that come from animals not raised in compliance with these standards:

• After December 31, 2019, confining a calf raised for veal with less than 43 square feet of usable floor space per calf
• After December 31, 2021, confining a breeding pig with less than 24 square feet of usable floor space per pig⁷
• After December 31, 2021, confining an egg-laying hen with less than the amount of usable floor space per hen required by the 2017 edition of the United Egg Producers' Animal Husbandry Guidelines for US Egg-Laying Flocks: Guidelines for Cage-Free Housing or in an enclosure other than a cage-free housing system⁸

CDFA is responsible for implementing the law, and effective September 1, 2022, the CDFA adopted regulations under Prop 12.⁹ Prop 12 applies to farms both inside and outside of California if the out of state farms will be selling their eggs, veal, or pork meat in California. Knowingly engaging in the sale of covered products from animals not confined in a manner consistent with the requirements of Prop 12 is a misdemeanor punishable by a fine not to exceed USD 1,000 or by imprisonment in the county jail for a period not to exceed 180 days, or both.¹⁰ It is important to note that the sale of combination food products including soups, sandwiches, pizzas, hotdogs, or similar processed or prepared foods are not subject to Prop 12. Decisions on whether to pursue specific remedies allowed under the law are made by the state Attorney General or local jurisdictional authorities like a District Attorney or City Attorney.

The Supreme Court's opinion

The National Pork Producers Council (NPPC) filed a lawsuit against the state of California seeking, among other things, a declaratory judgment that Prop 12 be found unconstitutional under the dormant Commerce Clause and a permanent injunction stopping its implementation and enforcement. The California district court granted the State's motion to dismiss, and the Ninth Circuit affirmed, holding that "[m]ost statutes that impose a substantial burden on interstate commerce do so because they are discriminatory" and NPPC had conceded that Prop 12 applied to both California entities and out-of-state entities.¹¹ The circuit court further held that the alleged cost increases to market participants and customers "do not qualify as a substantial burden to interstate commerce for purposes of the dormant Commerce Clause."¹² Justice Gorsuch delivered the judgment of the court, upholding California's Prop 12.¹³

In a hotly contested portion of the opinion, the court focused its attention on states' rights and the will of the people. NPPC asked the court to extend to its holding in Pike v. Bruce Church, Inc., 397 US 137 (1970), which held that "[w]here a statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits."¹⁴ Specifically, NPPC proposed that the court "heavily discount the benefits of Prop 12 because it has little interest in protecting the welfare of animals raised elsewhere and the law's health benefits are overblown."¹⁵

Acknowledging the State's right to decide the importance of protecting animal welfare, the court stated that "our cases have expressly cautioned against judges using the dormant Commerce Clause as a roving license for federal courts to decide what activities are appropriate for state and local government to undertake."¹⁶ "While there was a time when this court presumed to make such binding judgments for society, under the guise of interpreting the Due Process Clause, we have long refused pleas like petitioners' to reclaim that ground in the name of the dormant Commerce Clause."¹⁷

According to the court, Prop 12 "serves moral and health interests of some . . . magnitude for in-state residents" and "[i]n a functioning democracy, policy choices like these usually belong to the people and their elected representatives."¹⁸ The court emphatically declared that the role of a judge is not to "displace the cost-benefit analysis embodied in democratically adopted legislation guided by nothing more than their own faith in Mr. Herbert Spencer's Social Statics."¹⁹ The court instructed that "if pig husbandry really does [as NPPC suggests] imperatively demand a single uniform nationwide rule, they are free to petition Congress to intervene."²⁰ Otherwise, "[w]hile the Constitution addresses many weighty issues, the type of pork chops California merchants may sell is not on that list."²¹

New CDFA guidance on pork sales and implications for the food industry

According to CDFA's new guidance on pork sales published following the court's opinion, the previous injunction enjoining the enforcement of the requirements on pork sales is set to terminate on July 1, 2023. The focus of CDFA in implementing Prop 12 will be on distributors, who are required to register with the agency by submitting a completed distributor registration application. This registration was required to be submitted by January 1, 2023 and is renewed every twelve months. CDFA is continuing to accept applications for registration. Starting July 1, 2023, pork distributors must include a self-certification of compliance or a valid third-party certification when they apply for registration. Starting January 1, 2024, all distributors will be required to provide a valid third-party certification when applying for a new registration or when renewing their registration.

Unlike the distributors, the "end-users" including, but not limited to, restaurants and food retailers, are not required to register with CDFA. However, the agency noted in its guidance that it may be prudent for the "end-user" to request written certification of compliance from the distributor. Further, Prop 12 describes that it shall be a defense to any action to enforce the above requirements that a business owner relied in good faith upon a written certification by the supplier that the eggs, veal, or pork meat at issue were not derived from a covered animal who was confined contrary to the requirements of Prop 12.²² For noncompliant whole pork meat in inventory that was purchased prior to July 1, 2023, CDFA noted that it understands there will necessarily be a period of transition, and it does not intend to focus the limited resources on these products that are already in commerce. Rather, the agency will focus on setting up the producer and distributor registration and certification regulatory framework to ensure future compliance.

Prop 12 also introduces supply chain risk considerations for the food industry. For example, starting July 1, 2023, with restaurants and retailers requesting written certifications of compliance for pork sales, distributors will have to source products exclusively from compliant farms and maintain proper documentation to demonstrate compliance. Any lapse or failure in verifying the sourcing practices of suppliers can result in significant supply chain disruptions and legal repercussions. To mitigate supply chain risks, businesses should establish robust verification processes, maintain transparent communication channels along the supply chain, and implement stringent record-keeping systems.

Key takeaways

• California's Prop 12 is one of the most protective animal welfare laws in the United States, and the recent Supreme Court ruling paves the way for its enforcement.
• Farms who wish to sell their products into the Golden State, and food distributors, restaurants and retailers in California should assess the long-term business strategy in complying with Prop 12, including the potential impacts on its supply chains and operations.
• Companies who wish to challenge state laws in the future as an impermissible burden on interstate commerce must address the antidiscrimination principle that is at the core of the dormant Commerce Clause.

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For further information and to discuss what this development might mean for you, and compliance with California's Prop 12, please get in touch with the Baker McKenzie contacts provided above.

1 Prop 12 is codified as Cal. Health & Safety Code §§ 25990-25994.

2 Cal. Health & Safety Code § 25990.

3 See, e.g., N. Am. Meat Inst. v. Becerra, 420 F. Supp. 3d 1014 (C.D. Cal. 2019); Nat'l Pork Producers Council & Am. Farm Bureau Fed'n v. Ross, 2020 US Dist. LEXIS 3907 (S.D. Cal. Jan. 9, 2020); and Iowa Pork Producers Ass'n v. Bonta, 2022 US Dist. LEXIS 61999 (C.D. Cal. Feb. 28, 2022).

4 See Nat'l Pork Producers Council v. Ross, 143 S. Ct. 1142 (2023).

5 See id.

6 See https://www.cdfa.ca.gov/AHFSS/AnimalCare/docs/sales_wakeofsupremecourt_decision.pdf.

7 Enforcement of this provision was enjoined in February 2022 by the Sacramento Superior Court in California Hispanic Chambers of Commerce v. Ross (Case No. 34-2021-80003765), but that injunction is set to terminate on July 1, 2023 following the court's opinion

8 Cal. Health & Safety Code § 25990-25991.

9 The regulations are available at 3 California Code of Regulations §§ 1320-1326.

10 Cal. Health & Safety Code § 25993.

11 Nat'l Pork Producers Council v. Ross, 6 F.4th 1021, 1032 (9th Cir. 2021).

12 Id. at 1033.

13 Justice Gorsuch announced the judgment of the court, and delivered the opinion of the court with respect to Parts I, II, III, IV–A, and V, in which Justices Thomas, Sotomayor, Kagan, and Barrett joined, an opinion with respect to Parts IV–B and IV–D, in which Justices Thomas and Barrett joined, and an opinion with respect to Part IV–C, in which Justices Thomas, Sotomayor, and Kagan. Justice Sotomayor filed an opinion concurring in part, in which Justice Kagan joined. Justice Barrett filed an opinion concurring in part. Chief Justice Roberts filed an opinion concurring in part and dissenting in part, in which Justices Alito, Kavanaugh, and Jackson joined. Justice Kavanaugh filed an opinion concurring in part and dissenting in part.

14 397 US 137, 142.

15 Nat'l Pork Producers Council v. Ross, No. 21-468, 2023 US LEXIS 1892, at *36

16 Id. at *34 (citation and internal quotation marks omitted).

17 Id. (citation and internal quotation marks omitted)

18 Id. at *37.

19 Id. (citation and internal quotation marks omitted).

20 Id. at *38.

21 Id. at *13.

22 Cal. Health & Safety Code § 25993.1.