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A US federal court has upheld Oregon’s packaging extended producer responsibility (EPR) law, rejecting claims by the National Association of Wholesaler-Distributors (NAW) that the state law violated the US Constitution.
The ruling by Judge Michael Simon of the US District Court for the District of Oregon could influence similar cases challenging EPR laws in California and Colorado, where litigation is pending in both federal and state courts.
NAW filed the case against Oregon’s Department of Environmental Quality (DEQ) last year. The court granted a preliminary injunction in February, temporarily preventing the DEQ from enforcing the Recycling Modernization Act (RMA) against NAW members.
NAW’s remaining claims, centred on the Dormant Commerce Clause and due process protections under the US Constitution, were considered during a five-day trial in July.
"Neither challenge has merit," the court concluded on 27 August.
In the decision, the court also invoked a nearly century-old concept from former Supreme Court Justice Louis Brandeis, noting that the US federalist system gives states a certain amount of leeway to pass their own laws and allows them to "serve [as] a laboratory and try novel social and economic experiments without risk to the rest of the country".
Dormant Commerce Clause
The court rejected NAW’s claim that Oregon’s EPR law improperly placed an unfair burden on out-of-state producers, imposed unreasonable user fees and discriminated against interstate commerce in violation of the dormant Commerce Clause doctrine implied by the US Constitution.
According to the court, NAW failed to present sufficient evidence that the law would benefit Oregon companies at the expense of out-of-state competitors. It similarly dismissed NAW’s claim that Oregon’s user fee system is unfair.
NAW argued that the law’s small producer exemptions create problems of "free riding", resulting in NAW members paying disproportionately higher fees to cover the cost of the exemptions. However, the court said NAW presented no evidence to support this claim, adding that "free riding has no connection to whether the law exempts in-state or out-of-state entities".
The court also disagreed with NAW’s argument that the burdens of Oregon’s law outweighed the local benefits.
NAW’s claim of supply chain burdens is not "clearly excessive" in comparison to the benefits of the law for the state, the court said. Oregon has "a great and longstanding interest in protecting its citizens from the externalities created by waste and products at the end of their life", it said.
Due process
NAW’s due process claims were also dismissed by the court.
The trade group said producers were forced to join the Circular Action Alliance (CAA) and had no meaningful way to challenge the fee-setting process. NAW had also said that the DEQ only had "tangential" oversight and that most of the administration is delegated to the CAA, an unconstitutional delegation of authority.
In rejecting these arguments, however, the court noted that NAW had not requested that DEQ release the information it had on CAA’s process through Oregon’s public records request process.
The court also noted that while CAA’s specific formula is proprietary, the DEQ said during the trial that it had performed a detailed analysis to ensure the proposed fees complied with the RMA. The DEQ testified that this was an "iterative process" with the CAA prior to the DEQ's approval of the CAA’s plan.
The court concluded that the CAA plays an advisory role to the DEQ and the department retains ultimate decision-making authority.
NAW’s other due process argument relied on the idea that producers were effectively forced to join the CAA because it was prohibitively expensive to form their own PRO.
The court disagreed, saying it "cannot conclude that joining [the] CAA is akin to ‘surrendering to force’" and noting that producers also had the option to privately recycle all covered products and avoid the need to register with a PRO at all.
Responses
NAW said in a statement that it "strongly disagrees" with the court’s decision.
"The district court’s ruling is not the final word," the trade group said. "NAW remains committed to challenging these unconstitutional laws and protecting businesses from regulatory schemes that impose mandatory costs without adequate accountability or meaningful recourse."
NAW said it is still considering its next steps in Oregon, but that it "will continue making that case in our challenges to similar EPR laws in California and Colorado".
Meanwhile, the DEQ said it was pleased that the court recognised the state’s authority to move forward with the programme.
Jen Parrott, DEQ administrator of land quality programmes, said that "the goals behind this law remain important: improving recycling services, strengthening the infrastructure that sorts and processes recyclable materials and ensuring producers play a greater role in the costs associated with the products and packaging they place on the market".
The CAA told Chemical Watch News & Insight that the ruling "provides important clarity as Oregon's producer-funded recycling system continues to take shape".
"We remain committed to supporting producers every step of the way as they meet their obligations under the law, while continuing to work closely with local governments, recycling partners and state agencies to implement the programme."
A separate case is also pending in the same federal court in Oregon, where a foodservice product manufacturer is seeking relief from the state law for all producers, not just NAW members. A status report in that case is due by 10 September.
The case is National Association of Wholesaler-Distributors v Feldon.
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