The Sixth Circuit has accepted an interlocutory appeal in American Beverage Assoc. v. Snyder, Case No. 11-2097, from a Michigan decision (pdf) holding that state-specific marking requirements for bottles and cans subject to deposit refunds does not per se violate the Commerce Clause. As reported by John Agar of the Grand Rapids Press and Howard P.C. the trial court concluded there was not enough evidence in the record to decide whether statute passed the less stringent balancing test between the benefits of the regulation and the burdens on interstate commerce. The district court certified (pdf) the case for interlocutory appeal on the grounds that the per se issue was potentially dispositive and was one of first impression that the Sixth Circuit should decide.
Nine other states (California, Connecticut, Hawaii, Iowa, Maine, Massachusetts, New York, Oregon, and Vermont) have a "Bottle Bill" that requires bottle or can deposits and refunds, but only Michigan goes the next step and requires the state-specific markings at issue in this case. Those markings, say state officials, are designed to prevent fraudulent redemption of bottles for refunds -- i.e., people redeeming bottles in Michigan who did not pay the deposit because they bought the bottle in another state. In Michigan, the difference between the deposits paid on Michigan purchases and the amounts properly claimed as refunds by consumers go to the state and are used to compensate retailers and to fund environmental cleanup programs. By limiting fraudulent redemption, the amount of “unclaimed” refunds that would escheat to the state would likely increase.
The American Beverage Association ("ABA"), which represents producers, marketers, distributors, and bottlers of non-alcoholic beverages, challenged the statute that requires manufacturers to label bottles and cans sold in Michigan with a special Michigan-only mark that could be read by vending machines used to cash-in bottle refunds. The ABA emphasized the expense and difficulty of special labeling for an individual state and the corresponding impediment to distribution and moving product from one state to another to satisfy demand. The ABA also claimed that the statute’s true goal wasn’t to combat fraud but to increase the state's revenues through the escheat system.
The government defendants were joined in the trial court by the Michigan Beer and Wine Wholesalers Association, which intervened on behalf of its member wholesalers who distribute alcoholic beverages, many of whom also handle non-alcoholic beverages. The Wholesalers Association emphasized their heavy investment in the processing of deposit refunds and their interest in the law to prevent fraudulent redemption (either over- or under-redemption), which costs them money in processing costs that are not reimbursed by the manufacturer.
The district court decided that the law was not discriminatory in part from a concern that a contrary finding would have the enormous impact of invalidating almost every state packaging requirement. The court also concluded that Michigan's requirement that the special marking could not be used on bottles sold in other states was not a extraterritorial regulation -- bottlers could use whatever label they wanted in other states, it just had to be a little different than what was used in Michigan. These issues are now before the Sixth Circuit for its evaluation.