If California's Pork Law Falls, Will Section 2115 Be Next?
This week, the U.S. Supreme Court heard oral arguments in National Pork Producers Council v. Ross (Docket No. 21-468). The case involves a challenge to 2018 proposition that, among other things, forbids the sale of "any uncooked cut of pork" in California when the seller knows or should know that the meat came from the offspring of a sow that was confined anyplace "in a cruel manner". Out of state producers argued that the proposition violates the dormant commerce clause because: (i) its practical effect is to control commercial conduct in other states; and (ii) it imposes a burden on interstate commerce that is "clearly excessive in relation to the putative local benefits".
We will have to wait and see what the Supreme Court decides. If the Court strikes down the proposition, it will give hope to others advancing dormant commerce clause challenges. Many corporate lawyers likely consider California laws imposing California governance standards on foreign corporations to be just as constitutionally infirm as California's proposition imposing production standards on out-of-state pork producers. Indeed, the Delaware Supreme Court reached that same conclusion with respect to California Corporations Code Section 2115 in Vantagepoint Venture Partners 1996 v. Examen, Inc., 871 A.2d 1108 (2005). However, a California Court of Appeal has rejected a commerce clause challenge to Section 2115. Wilson v. Louisiana-Pac. Res., Inc., 138 Cal. App. 3d 216, 228, 187 Cal. Rptr. 852, 861 (1982) ("We conclude that to the extent that the cumulative voting requirement imposed by section 2115 upon pseudo-foreign corporations is shown to have any effect upon interstate commerce, the effect is incidental, and minimal in relation to the purpose which that requirement is designed to achieve.").
California's attempt to regulate pork may in any event be distinguished because the proposition in no way enhances the physical quality of pork sold in California. Section 2115 in contrast actually alters the rights that may be exercised by stockholders in foreign corporations. Therefore, the invalidation of California's attempt to regulate pork production may not spell doom for Section 2115.