Am. Beverage Ass'n v. Snyder

• Decision Date: 29 November 2012
• Docket Number: No. 11–2097.,11–2097.
• Citation: 700 F.3d 796
• Parties: AMERICAN BEVERAGE ASSOCIATION, Plaintiff–Appellant, v. Rick SNYDER, Bill Schuette, and Andrew Dillon, Defendants–Appellees, Michigan Beer & Wine Wholesalers Association, Intervenor–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

700 F.3d 796

AMERICAN BEVERAGE ASSOCIATION, Plaintiff–Appellant,

v. Rick SNYDER, Bill Schuette, and Andrew Dillon, Defendants–Appellees,Michigan Beer & Wine Wholesalers Association, Intervenor–Appellee.

No. 11–2097.

United States Court of Appeals, Sixth Circuit.

Argued: July 20, 2012.

Decided and Filed: Nov. 29, 2012.

ARGUED:Patricia A. Millett, Akin Gump Strauss Hauer & Feld LLP, Washington, D.C., for Appellant. John J. Bursch, Office of the Michigan Attorney General, Lansing, Michigan, Anthony S. Kogut, Willingham & Coté, East Lansing, Michigan, for Appellees. ON BRIEF:Patricia A. Millett, Akin Gump Strauss Hauer & Feld LLP, Washington, D.C., Hyland Hunt, Akin Gump Strauss Hauer & Feld LLP, Dallas, Texas, for Appellant. John J. Bursch, Margaret A. Nelson, Ann M. Sherman, Office of the Michigan Attorney General, Lansing, Michigan, Anthony S. Kogut, Curtis R. Hadley, Willingham & Coté, East Lansing, Michigan, for Appellees. Cory L. Andrews, Washington Legal Foundation, Washington, D.C., Helgi C. Walker, Wiley Rein LLP, Washington, D.C., for Amici Curiae.

Before: CLAY and SUTTON, Circuit Judges; RICE, District Judge. ^*

CLAY, J., delivered the opinion of the court in which SUTTON, J., and RICE, D.J., joined. SUTTON, J. (pp. 810–15), delivered a separate concurring opinion. RICE, D.J. (pp. 815–16), also filed a separate concurring opinion.

OPINION

CLAY, Circuit Judge.

Plaintiff, the American Beverage Association (“Association”), appeals the district court's order granting summary judgment to Defendants, Governor Rick Snyder, Attorney General Bill Schuette, and Michigan Treasurer Andrew Dillon in their official capacities (collectively Defendants), and the Michigan Beer & Wine Wholesalers Association (“MBWWA”), which intervened in support of Defendants. Plaintiff argues that Mich. Comp. Laws § 445.572a(10), which requires certain returnable bottles and cans to possess a unique-to-Michigan mark designation, violates the dormant Commerce Clause, regulates extraterritorially, and discriminates against interstate commerce. For the reasons set forth below, we AFFIRM in part, REVERSE in part, and REMAND for further proceedings.

BACKGROUND

A. Michigan's Beverage Container Deposit Law

Michigan is one of ten states that requires consumers to pay a can, plastic bottle, or glass bottle deposit when purchasing specified beverage containers. Mich. Comp. Laws § 445.571 et seq.¹ In 1976, Michigan enacted the Michigan Container Act, commonly referred to as the “Bottle Bill.” The purpose of the Bottle Bill was to promote and encourage the recycling of beverage containers by offering a cash refund of a ten-cent deposit to consumers and distributors in an effort to reduce the amount of bottle and can litter. SeeMich. Comp. Laws § 445.571 et seq.; see also Michigan Bottle Bill, A Final Report to: Michigan Great Lakes Protection Fund, http:// www. michigan. gov/ documents/ deq/ deq- ogl- mglpf- stutz_ 249882_ 7. pdf, at 2 (last visited August 20, 2012). The Bottle Bill requires any beverage—defined as “a soft drink, soda water, carbonated natural or mineral water, or other nonalcoholic carbonated drink; beer, ale, or other malt drink of whatever alcoholic content; or a mixed wine drink or a mixed spirit drink”—to be sold to consumers in “returnable” containers. See id. §§ 445.571(a), 445.571(d). A “returnable” container is a container “upon which a deposit of at least 10 cents has been paid, or is required to be paid upon the removal of the container from the sale or consumption area, and for which a refund of at least 10 cents in cash is payable by every dealer or distributor....” See id. § 445.571(d). All businesses that sell beverages to consumers are required to accept for rebate an empty container “of any kind, size, and brand” of beverage that the retailer (dealer) sells. See id. § 445.572(2). In exchange, the business or a reverse vending machine ² provides the consumer a ten-cent deposit refund paid on that container. The retailers then return the empty containers to beverage distributors or manufactures and collect the ten-cent refund. See id. § 445.572(6). The Bottle Bill requires beverage containers sold within the State to clearly indicate the state's name and the containers' refund value. See id. § 445.571(d). That information appears as “MI 10¢” on each individual beverage container.

B. The Redemption Problem

Although the Bottle Bill has been successful in improving the environment by promoting the recycling of beverage containers, the bill also created two unanticipated problems: (1) consumers deposited more money on nonalcoholic beverage containers than distributors or manufacturers paid out in refunds (underredemption); and (2) the value of the deposits collected by the distributor or manufacturer was less than the total value of refunds paid (overredeemption). To address the problem of underredemption, the Michigan Legislature amended the Bottle Bill in 1989, and mandated that the value of unclaimed deposits escheat to the State Treasury. Under the amendment, the State Treasury gave 25 percent of the unclaimed revenue to in-state beverage retailers and the remaining 75 percent financed a Michigan cleanup and redevelopment trust fund. See id. § 445.573(c).

Despite the 1989 Bottle Bill Amendment, the redemption problem continued. Specifically, the State recognized that individuals would purchase beverage containers outside of Michigan and then attempt to return the beverage containers in Michigan to redeem the ten-cent deposit. As a result, the unauthorized returns and redemptions reduced the revenue stream to the State because no deposit was paid to the State of Michigan. A 1998 study estimated that fraudulent redemption in Michigan of beverage containers originating from outside of Michigan resulted in a loss of $15.6 to $30 million every year in Michigan deposits. In an effort to reduce these fraudulent redemptions, the Michigan Legislature enacted a statute criminalizing the redemption of containers by any individual who knows or should have known that no deposit was paid on the container. See id. §§ 445.574a and b.

C. Michigan's Unique–Mark Amendment to the Bottle Bill

In December 2008, the Michigan Legislature amended the State's Bottle Bill in order to increase revenue to the State. The Amendment required that, in addition to the MI 10¢ designation, containers for certain brands of beverages bear a “symbol, mark, or other distinguishing characteristic that is placed on a designated metal container, designated glass container, or designated plastic container by a manufacturer to allow a reverse vending machine to determine if that container is a returnable container....” See id. § 445.572a(10). The mark “must be unique to the state,” and can be “used only in this state and 1 or more other states that have laws substantially similar to this act.” Id. The provision does not define “substantially similar,” but the State interprets the phrase to include all states with Bottle Bill deposit schemes, including those where the deposit is less than Michigan's. Failure to comply with the new provision could result in a penalty of up to six months' imprisonment and/or a $2,000 fine. See id. § 445.572a(11). The provision applies only to companies that meet the State's specified threshold sales requirements.

On March 1, 2010, the Bottle Bill provision went into effect for nonalcoholic beverages in 12–ounce metal containers.³See id. § 445.752a(2). On February 24, 2011, the provision went into effect for nonalcoholic beverages in 12–ounce glass or plastic containers.⁴See id. § 445.572a(3)-(5).

Plaintiff is a “non-profit association of the manufacturers, marketers, distributors, and bottlers of virtually every nonalcoholic beverage sold in the United States,” including bottled water, juices, juice drinks, soft drinks, teas, dairy beverages, sports drinks, and energy drinks. (Pl.'s Br. 12.) Plaintiff seeks to protect “its members' legal rights and the interests of the industry and beverage consumers” and represents members that produce beverages regulated by the Michigan 2008 Amendment to the Bottle Bill. ( Id.)

On February 25, 2011, Plaintiff filed this action in the United States District Court for the Western District of Michigan against Defendants, seeking declaratory, injunctive, and other relief. Plaintiff claimed that Mich. Comp. Laws § 445.572a(10), a provision of the 2008 Bottle Bill, violated the Commerce Clause of the United States Constitution, art. I, § 8, cl. 3. Plaintiff alleged that the 2008 provision requires interstate beverage manufacturers, on pain of criminal penalty, to produce, distribute, and sell designated beverages in unique-to-Michigan containers, and prohibits the sale of those same packaged beverages in all (or almost all) other States in the Country. Plaintiff further claimed that compliance with Michigan's unique-mark requirement is extraterritorial because the Association's members must “change the way they source and deliver product both in Michigan and in the other states in which they operate ... [by isolating] the Michigan-specific product in separate Michigan-specific manufacturing and distribution locations or in segregated areas of multi-state manufacturing and distribution facilities.” (R.1, Compl. ¶ 60.) According to Plaintiff, compliance with the statute increases the need for more warehouse space to separate inventory and eliminates flexibility in the supply chain.

Plaintiff moved for summary judgment arguing that, as a matter of law, the challenged statute is both extraterritorial and discriminatory in violation of the dormant Commerce Clause. Alternatively, Plaintiff argued that it should prevail under the balancing test set forth in Pike v. Bruce Church, Inc., 397 U.S. 137, 142, 90 S.Ct. 844, 25 L.Ed.2d 174 (1970), which upholds a state regulation unless the burden on interstate commerce outweighs the local benefits. Brown–Forman Distillers Corp. v. N.Y. State Liquor...