Perhaps it’s an overused phrase but “sometimes you win, sometimes you lose” has relevance to agriculture lately. It’s a fitting response to several new decisions from the federal courts. Some of the decisions align with positions advocated by agricultural interests but others do not. We wrote last week about a case in the “sometimes you lose” category--the Court’s ruling in favor of small refineries claiming exemptions from renewable fuels mandates. Several members of Congress have already proposed legislation that would nullify the Court’s decision in that case. A second loss came with a challenge to California’s animal welfare standards and a third with the court striking down a waiver of E15 ethanol blends. The sole win came with a challenge to a California statute allowing union organizing activities on private property. Here’s a summary.
California Proposition 12 – North American Meat Institute v. Bonta
The U.S. Supreme Court announced that it would not grant certiorari and review a decision by the Ninth Circuit Court of Appeals’ on California Proposition 12. Voters approved Proposition 12, the “Prevention of Cruelty to Farm Animals Act,” in 2018. The Act establishes housing standards for egg-laying hens, breeding hogs and veal calves and prohibits the confinement of animals in spaces that don’t meet the standards. Business owners and operators in California may not sell meat or egg products from animals that are not confined according to the standards. Standards for calves (43 square feet) and egg laying hens (1 square foot) became effective in 2020 while standards for breeding pigs and their offspring (24 square feet) and cage-free provisions for egg laying hens are to be effective beginning January 1, 2022.
The North American Meat Institute (NAMI) sought a preliminary injunction against Proposition 12 in 2019, arguing that it violates the Interstate Commerce Clause of the U.S. Constitution, which grants only Congress the authority to regulate commerce among the states. NAMI claimed that the Act establishes a “protectionist trade barrier” that would protect California producers from out-of-state competition and control conduct outside of its state borders.
Both the federal District Court and the Ninth Circuit Court of Appeals disagreed with NAMI. The appellate court affirmed the District Court’s conclusions that Proposition 12 is not discriminatory on its face and does not have a discriminatory purpose or effect, as there was no evidence that the state had a protectionist intent and the Act treats in-state and out-of-state producers the same. Nor does the Act try to directly regulate out-of-state conduct or impose burdens on out-of-state producers, but instead only precludes sale of meats resulting from certain practices, the courts concluded. The federal government and 20 states joined NAMI in a request for a rehearing of the case by the full panel of judges on the Ninth Circuit but were unsuccessful.
NAMI turned to the U.S. Supreme Court, seeking a review of the case on the basis that the Ninth Circuit’s decision conflicts with holdings by other appellate courts and the U.S. Supreme Court. The Supreme Court denied the request for review on June 28, offering no explanation for its decision. The legal challenges to Proposition 12 do not end with that denial, however. A separate case filed by the National Pork Producers Association and American Farm Bureau Federation is pending before the Ninth Circuit Court of Appeals. It also argues that Proposition 12 negatively impacts interstate commerce and will increase consumer costs for pork and that the federal district court judge who dismissed the case failed to examine the practical effects the law would have on producers. The Ninth Circuit heard the appeal in April, so we may see a decision in the next few months.
E15 waiver: American Fuel & Petrochemical Manufacturers v. EPA
The D.C. Circuit Court of Appeals held in favor of a claim by the American Fuel and Petrochemical Manufacturers (AFPM) challenging a Trump Administration rule in 2019 that waived restrictions on summer sales of E15 due to higher fuel volatility in summer temperatures. The decision could mean that current sales of E15 must end unless further legal challenges follow.
The 2019 Reid Vapor Pressure (RVP) waiver for E15 allowed fuel stations to sell 15% ethanol blends during the summer months rather than limiting those sales to 10% ethanol, a move that would increase ethanol sales. As expected, the oil and gas refining industry responded to the waiver issuance with a legal challenge, arguing that the administration lacked the authority to grant the RVP waiver for fuels over 10% ethanol.
The volatility waiver authority derives from the Clean Air Act, which establishes when the EPA may alter volatility limits through the waiver process and specifically allows the EPA to grant an ethanol waiver for “fuel blends containing gasoline and 10 percent denatured anhydrous ethanol” in Section 745(h)(4). The EPA relied upon the ethanol waiver language in the Clean Air Act back in 1992 to waive volatility standards for E10. But whether the EPA could use the Clean Air Act language to issue a waiver for ethanol beyond 10 percent is the question at the heart of the dispute. The EPA and intervenors in the case representing biofuel interests claimed the language was ambiguous enough to allow the EPA to grant waivers for fuel with 10% ethanol or more.
In a unanimous decision, the Court of Appeals concluded that “the text, structure, and legislative history” of the Clean Air Act do not allow EPA to extend a waiver to E15. The court found the statutory language straightforward, lacking any modifiers that would establish a range of ethanol blends rather than the 10 percent stated in the statute. Legislative actions at the time also supported an interpretation that the 10 percent language addressed E10 and not ethanol blends in excess of 10 percent.
The next critical question for this case is what the Biden Administration EPA will do with case and the E15 waiver. A request for further review of the D.C. Circuit’s opinion is possible. Or perhaps the EPA will pursue a legislative fix that increases the statutory reference from 10 percent to 15 percent ethanol. And it’s always possible that no further action will occur and E15 summer sales will no longer be an option.
Union organizer access as a taking – Cedar Point Nursery v Hassid
In the “win” column for agricultural employers is a case that asks whether a state regulation granting access to private property for union activities is a “taking” of property under the Constitution. The U.S. Supreme Court’s answer to the question is “yes,” although three of the Justices dissented from the majority opinion.
A regulation formed under the California Agricultural Labor Relations Act of 1975 gives labor organizations a “right to take access” to an agricultural employer’s property “for the purpose of meeting and talking with employees and soliciting their support.” The regulation requires agricultural employers to allow union organizers to be on the property up to three hours per day and four 30-day periods per year but cannot be “disruptive” and must provide written notice to employers. An employer who interferes with the organizers can be subject to sanctions.
After representatives from United Farm Workers accessed Cedar Point Nursery and engaged in disruptive conduct and sought to access Fowler Packing Company, both occasions without notice to the employers, the companies filed a lawsuit seeking an injunction from the federal District Court. They argued that the regulation was a physical taking of their properties because it granted an easement to the union organizers, which required compensation under the Fifth and Fourteenth amendments of U.S. Constitution.
The District Court did not grant the injunction and held that the regulation is not a physical taking because it doesn’t allow the public a permanent and continuous right of access to the property for any reason. The Ninth Circuit Court of Appeals affirmed that decision, agreeing that it wasn’t a physical taking, but a strong dissent argued that the union activities were a physical occupation and taking of property. The agricultural companies sought but were denied a hearing before all of the Ninth Circuit judges, leading to a request for review granted by the U.S. Supreme Court.
The majority of the Justices concluded that the California regulation is a physical taking because it grants union organizers a right to invade an agricultural employer’s property. Particularly important to the majority was the regulation’s removal of an owner’s right to exclude people from their private property, which is a “fundamental element” of property rights according to the Court. The Court rejected the argument that the access must be continuous and permanent to be a physical taking and dispensed with claims that the holding could endanger regulations that allow government entries onto private land. The Court’s holding was clear: the access regulation amounts to simple appropriation of private property.
Read the court opinions in these three cases here: