Why You Need Lawyers

A semi-monthly feature, exclusive to NCRA News, from NCRA general counsel and board member John Moore, concerning recent legal decisions relating in some manner to Zero Waste.

By John D. Moore, NCRA Vice President and Legal Counsel, Henn, Etzel & Moore, Inc.
A few months back I reported about a 3-judge panel of the Ninth Circuit Court of Appeals decision rejecting the constitutional Commerce Clause challenge to Alameda County’s drug EPR program (BTW- Longs in uptown Oakland does not accept take-back). Big pharma had asserted that the County ordinance impermissibly regulated out of state conduct. Since the ordinance expressly only applies to companies that sell drugs in the county and applies even-handily to such companies whether based inside or outside the county and state, I thought to myself: pretty obvious and the Court got it right.

But this week an 11-judge panel of the same Court (not including any of the judges in the pharma case) came to an opposite conclusion involving sales of fine art in St. Francis Foundation v. Christie’s et al. A California statute imposes a 5% royalty, payable to the artist, when a work of fine art is re-sold. The purpose is so when someone who bought an Andy Warhol print of a soup can for $10 from the artist when young, re-sells it many years later for $10 million, the artist, now successful, is rewarded. The California statute expressly applies only when a seller resides in California or the sale transaction occurred in California. Like the pharma case, when applied within this structure, out of state and in-state art sellers are treated the same.

In this new case, the plaintiffs (artists or their estates) sued three large agents for resellers of fine art, Christies, Sothebys and Ebay for not making the required royalty payment. Plaintiffs claimed unpaid royalties on sales both in California and in other states. Without distinguishing the claims about the in-state sales from the out-of-state ones, the Court decided that the California statute does violate the Commerce Clause because the legislation can apply to out-of-state conduct, which the Commerce Clause precludes. What? How can that be?

So the Court made up a hypothetical: what if a California resident living part time in New York buys fine art in North Dakota? This transaction has no relationship to California other than the residency of the buyer is there. From this hypothetical – not the reported facts of this case, the Court summarily concluded, “We easily conclude that the royalty requirement, as applied to out-of-state sales by California residents, violates the dormant Commerce Clause.” Without further explanation.

The Court did not reveal how the transactions subject to this lawsuit were analogous to this hypothetical. The Court offered no further explanation about how the California law regulated conduct out of state. The remainder of the opinion is a discussion about how the part of the statute applicable to the residence of the seller is legally severable from the rest of the statute that regulates California sales transactions, so that the former is effectively stricken while the rest remains valid.

Appellate Court judges and justices tend to be more result-oriented and less objectively analytical than they might confess in public. The result is either popular or it is not. Roe v. Wade, for example, is founded on a constitutional principle not actually found in the constitution. As another example, the Supreme Court case establishing that the Commerce Clause applies to solid waste because solid waste is an “article of interstate commerce”, never explains why that might be so, or what law it was relying upon to so state. Why a Court protects artists and competing waste haulers but not drug companies is anybody’s guess. I mention this only to highlight the unpredictability of the outcome of disputes that are litigated. But I can’t really complain, it creates work for me.