17 Republican State Attorneys General Jointly Sue California Over Packaging EPR Law

Key Takeaways

• A coalition of 17 states, led by Nebraska's attorney general, filed a federal lawsuit Monday challenging California's SB 54, the Producer Responsibility and Source Reduction Law, calling it an "unprecedented power grab."
• The National Association of Wholesaler-Distributors (NAW) said it will join the case as the sole business plaintiff. NAW previously secured a preliminary injunction halting enforcement of Oregon's packaging EPR law against its members, with a five-day trial set to begin July 13.
• The coalition seeks to block enforcement of SB 54 while the case is pending. "No state should restrict interstate commerce, let alone delegate taxing authority to third parties outside public oversight," NAW President and CEO Eric Hoplin said in a statement.

Deep Dive

The complaint, filed in the U.S. District Court for the Eastern District of California, names CalRecycle Director Zoe Heller and the Circular Action Alliance (CAA) as defendants.

CalRecycle declined to comment on the pending litigation. "The department remains focused on implementing SB 54 and advancing the requirements established in the regulations," spokesperson Lance Klug said in an email.

The coordinated lawsuit comes a week after CAA — the industry-funded and regulated nonprofit producer responsibility organization selected by CalRecycle to help implement California's law — released its draft state plan. In that draft, CAA projected the California program budget could reach up to $1.87 billion in 2027, with a five-year total potentially reaching $17.2 billion.

Meanwhile, nearly a year has passed since NAW first filed suit over Oregon's newly enacted EPR law, and that case is heading to trial. NAW drew widespread attention when it secured a preliminary injunction in February, but the Oregon judge did not allow other groups, such as the American Forest & Paper Association, to join the case.

The complaint alleges the law harms producers, manufacturers, distributors, and consumers, violating the U.S. Constitution and the California Constitution. Similar to NAW's Oregon challenge, the plaintiffs in the California case argue SB 54 violates the Commerce Clause. Additionally, the challenge cites the First Amendment and other issues.

As in Oregon, NAW and the state attorneys general criticize the PRO's power in the EPR fee-setting process. "California has delegated the authority to develop the fee methodology to CAA, and that methodology has been declared confidential," NAW's press release states. "Businesses subject to the law's fees cannot challenge assessments in court; their only recourse is binding arbitration run by CAA itself."

In the face of the lawsuit, CAA maintains its role is unchanged. "We continue to implement SB 54 in accordance with state law and regulatory oversight," spokesperson Larine Urbina said in an email. "We remain committed to working closely with CalRecycle and stakeholders to develop a plan that is effective, practical, and achieves the law's intended outcomes."

Urbina said "CAA has been transparent about its fee-setting methodology from the outset," noting that information on the methodology, principles, and fee schedules has been publicly discussed and made available. Urbina also mentioned that CAA has initiated "extensive consultation efforts" to continue engaging the producer community in the fee-setting process.

NAW said the state attorneys general joining Nebraska include Alabama, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Missouri, Montana, North Dakota, Oklahoma, South Carolina, South Dakota, Texas, Utah, and West Virginia.

"California cannot set national policy," Nebraska Attorney General Mike Hilgers said in NAW's announcement. "Nebraska is leading this coalition because the constitutional issues here belong to every state."

Packaging has become a recent focus for Republican attorneys general. A smaller coalition led by Florida Attorney General James Uthmeier has been voicing concerns since last year over the actions of packaging sustainability groups such as the U.S. Plastics Pact and GreenBlue. Uthmeier accuses these groups of "coordinating with some of America's largest corporations to implement anticompetitive recycling practices that may violate state and federal antitrust laws."

SB 54 has faced court challenges before, but from different plaintiffs: environmental NGOs. CalRecycle's own supporting groups — Californians Against Waste, the Natural Resources Defense Council, and Oceana — filed a petition and complaint this month in San Francisco Superior Court, arguing that the SB 54 regulations finalized in May "have been weakened and create massive loopholes that undermine the law's recycling and plastic reduction goals."

Another major packaging lawsuit is also pending in California. Trade groups, including the Flexible Packaging Association, filed a federal lawsuit in March challenging California's SB 343 (the "truth in labeling" law), which takes effect this October, with plaintiffs alleging it infringes on free speech. A hearing on a possible preliminary injunction was held earlier this month, but the court has not yet issued a written ruling.

CAA's California EPR program plan will undergo revisions in the coming months. Ultimately, the law requires that by 2032, producers must reduce single-use plastic packaging and food service ware by 25%, recycle 65% of single-use plastic packaging and food service ware, and ensure 100% of single-use packaging and plastic food service ware is recyclable or compostable.