California Egg Producer Fails to Crack New Shelled Egg Law

February 9, 2015

The Ninth Circuit recently upheld California’s Proposition 2, Cal. Health & Safety Code §§ 25990-25991, agreeing with the U.S. District Court for the Central District of California that the new shelled egg law is constitutional. See Cramer v. Harris, ___ F. App’x ___, 2015 WL 452365 (9th Cir. Feb. 4, 2015). Since becoming effective on Jan. 1, 2015, the new law has caused shelled egg prices throughout California to increase dramatically. Because relatively few producers currently satisfy the regulations, available supply has decreased and prices have correspondingly increased. Some estimate that the regulation’s requirements will cause producers’ costs to rise by 15 percent, and resulting egg costs, by 10 to 40 percent.

California’s Proposition 2 regulates, among other things, the amount of space an egg-laying hen must have in any enclosure. The hen must be able to spread both wings and turn a complete circle without touching any impediment, including a neighboring bird – a standard that, while not scientific or “precise” in measure, “can be observed and measured” by “a person of reasonable intelligence.” See Op. at 3.

This case, originally brought in 2012 by Riverside County egg producer William Cramer, is the first challenge to the new shelled egg laws to reach a decision in the Ninth Circuit. In early 2014, six states (Missouri, Nebraska, Oklahoma, Kentucky, Alabama and Iowa) filed challenges to AB 1437 and companion regulation 3 CA ADC § 1350(d)(1), which imposed the requirements of Proposition 2 on any producer selling shelled eggs into the state of California. In October 2014, U.S. District Judge Kimberly J. Mueller dismissed the states’ case on standing grounds without leave to amend. See Missouri v. Harris, ___ F. Supp. 3d ___, 2014 WL 4961473 (E.D. Cal. 2014). The states have appealed the dismissal, and their brief currently is due March 4, 2015, in the Ninth Circuit.

The regulations demonstrate the increasingly complex patchwork of local, state and federal laws governing the food and beverage industry. McGuireWoods’ food and beverage industry group actively monitors such developments and routinely advises clients of the rapidly evolving regulatory and legal landscape confronting the industry.