

                    UNITED STATES COURT OF APPEALS                            UNITED STATES COURT OF APPEALS
                        FOR THE FIRST CIRCUIT                                FOR THE FIRST CIRCUIT
                                             

No. 95-1243

                    UNITED EGG PRODUCERS, ET AL.,

                        Plaintiffs, Appellees,

                                  v.

                   DEPARTMENT OF AGRICULTURE OF THE
                 COMMONWEALTH OF PUERTO RICO, ET AL.,

                       Defendants, Appellants.

                                             

             APPEAL FROM THE UNITED STATES DISTRICT COURT

                   FOR THE DISTRICT OF PUERTO RICO

          [Hon. Juan M. Perez-Gimenez, U.S. District Judge]                                                                  
                                             

                                Before

                        Torruella, Chief Judge,                                                      

                   Campbell, Senior Circuit Judge,                                                         

                      and Watson,* Senior Judge.                                                       
                                             

    Edgardo  Rodriguez-Quilichini,  Assistant Solicitor  General, with                                         
whom Carlos Lugo-Fiol, Solicitor General, and Jacqueline Novas-Debien,                                                                             
Acting Deputy Solicitor General, were on brief for appellants.
    Philip  C. Olsson with  whom Olsson,  Frank and  Weeda, Enrique M.                                                                              
Bray  and Nachman,  Santiago,  Bray &amp;  Guillemard  were on  brief  for                                                         
appellees.

                                             

                            March 6, 1996

                                                

*Of  the  United  States  Court of  International  Trade,  sitting  by
designation.

                                             

CAMPBELL, Senior Circuit Judge.  Defendants-appellants the Puerto Rico                                      

Department of Agriculture and its former Secretary, Alfonso D vila, in

his  individual and  official capacities,  challenge an  order of  the

United  States District Court for the District of Puerto Rico granting

a permanent injunction  against the enforcement of  Puerto Rico Market

Regulation  Number 3, section X(F).   Section X(F)  requires that eggs

imported into Puerto Rico  from the mainland United States  be stamped

with the  two-letter postal code of the state of origin.  The district

court ruled  in favor of plaintiffs-appellees United Egg Producers and

Instituto  Puertorrique o de  Carnes,  Inc.,1  after determining  that

section  X(F)  imposed a  substantial  burden  on interstate  commerce

contrary to the Dormant Commerce Clause. 

I. The Egg Products Inspection Act and Section X(F)        I. The Egg Products Inspection Act and Section X(F)

    Although not a state, the Commonwealth  of Puerto Rico is  subject

to the constraints  of the Dormant Commerce Clause  to the same degree

as are the states.   Trailer Marine Transp.  Corp. v. Rivera  Vazquez,                                                                             

977 F.2d 1, 7 (1st Cir. 1992).  In the proceedings below, the district

court  ruled  that  the regulation  in  question,  Puerto Rico  Market

Regulation  Number 3,  section X(F),  was  an impermissible  burden on

interstate commerce  hence invalid under the  Dormant Commerce Clause.
                                                

    1United  Egg Producers  is  an Atlanta,  Georgia,  national  trade
association  whose  members  include  egg producers  in  every  state.
Instituto  Puertorrique o de Carnes, Inc., is a San Juan, Puerto Rico,
trade  association  representing  Puerto Rican  distributors  of  food
products.

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Section  X(F) requires the labeling of eggs imported from elsewhere in

the United States into Puerto Rico:

    Imported  eggs to be marketed  in Puerto Rico  shall have the
    letters from  the state of origin  if produced in a  state of
    the  United  States using  the  initials  established by  the
    United  States Postal Service, . .  . stamped on each egg, as
    established by the Egg Products  Inspection Act (21 USC 1031,
    Section 23 b,2).

Puerto  Rico Market Regulation Number  3, section X(F).   Section X(F)

purports  to have been promulgated in conformity with the Egg Products

Inspection Act (EPIA), which provides that: 

    no  State   or  local   jurisdiction  other  than   those  in                                                                         
    noncontiguous areas of the United States may require labeling                                                    
    to show the State or other geographical area of production or
    origin.

21  U.S.C.    1052(b)(2)  (emphasis supplied).    Puerto Rico  is,  of

course,  one  of the  noncontiguous  jurisdictions  excepted from  the

statute's prohibition against egg-labeling.  

    This appeal presents  two main questions: (1) whether section X(F)

of   Puerto  Rico's  Market  Regulation   Number  3  was,  in  effect,

Congressionally  authorized, so  as  to be  beyond  the reach  of  the

constraints of the  Dormant Commerce  Clause; and (2)  if the  Dormant

Commerce  Clause  is applicable,  whether  section  X(F) impermissibly

burdens interstate commerce.  We address each of these issues.

II. Congressional Authorization        II. Congressional Authorization

    The Commerce Clause provides that "Congress  shall have Power .  .

. To regulate Commerce .  . . among the several States."   U.S. Const.

art.  I,     8,  cl.  3.    The  Supreme  Court  has interpreted  this

                                  4

affirmative grant of authority  to Congress as also  establishing what

has come to be called the Dormant Commerce Clause --  a self-executing

limitation  on  state authority  to  enact  laws imposing  substantial

burdens on interstate  commerce even in  the absence of  Congressional

action.  See South-Central Timber Dev., Inc. v. Wunnicke, 467 U.S. 82,                                                                

87 (1984).  The  Dormant Commerce Clause does  not, however, apply  to

state or local regulations directly authorized by Congress.   "It is .

. . clear that  Congress may 'redefine the distribution  of power over

interstate  commerce'  by 'permit[ting]  the  states  to regulate  the

commerce in a manner which would otherwise not be  permissible.'"  Id.                                                                              

at 87-88   (quoting Southern Pac. Co. v. Arizona ex rel. Sullivan, 325                                                                         

U.S.  761, 769  (1945)); see  also White  v. Massachusetts  Council of                                                                              

Constr. Employers, 460 U.S. 204, 213 (1983);  New England Power Co. v.                                                                           

New  Hampshire,  455 U.S.  331,  340  (1982).   Thus,  state or  local                      

jurisdictions  operating  under "Congressional  consent"  are free  to

enact laws burdening interstate commerce. 

    The standard for finding Congressional consent is, however,  high.

Congressional consent to otherwise impermissible state regulation must

be either "expressly stated,"   Sporhase v. Nebraska ex  rel. Douglas,                                                                             

458 U.S. 941, 960 (1982), or "made unmistakably clear," South-Central,                                                                             

467 U.S. at  91.  The  state or local  jurisdiction (in this case  the

Commonwealth of Puerto Rico) has the burden of demonstrating Congress'

unmistakably   clear   intent   to   allow   otherwise  discriminatory

regulations.  Wyoming v. Oklahoma, 502 U.S. 437, 458 (1992).                                         

      To  determine if Congressional consent was extended  here, so as

                                  5

to  authorize  Puerto Rico's  labeling  regulation  regardless of  its

impact  on commerce,  we begin  by examining  Congress' language.   In

section  1052(b)(2),   Congress  did  not  state   affirmatively  that

noncontiguous jurisdictions could "require  labeling to show the State

or  other  geographical  area  of production  or  origin."    Instead,

Congress excepted "noncontiguous areas of the United States" including

Puerto Rico, from  the blanket  prohibition it was  placing upon  egg-

labeling in all other places. 21 U.S.C.   1052(b)(2).  Read literally,

  1052(b)(2) can be said  to go no further than to  exempt Puerto Rico

from Congress' own egg-labeling ban.  The exemption is consistent with

intending to allow Puerto Rico to adopt only egg-labeling requirements

that do not  otherwise violate  the Dormant Commerce  Clause --  i.e.,

regulations  justified  by a  legitimate  state interest,  such  as to

protect  the  health of  its  residents,  that could  not  be met  via

nondiscriminatory alternatives.2  

    To be  sure, the statutory exemption  is perhaps  susceptible to a

reading going  beyond the above.   One can argue that  as Congress had

                                                

    2Before   the   enactment  of      1052(b)(2),   any  egg-labeling
requirements passed by the  states would have been subject  to Dormant
Commerce Clause analysis and upheld only if they did not substantially
burden interstate commerce or if the burden on interstate commerce was
justified by  a legitimate state  interest.  After the  enactment of  
1052(b)(2), states  in  contiguous areas  of  the United  States  were
prohibited  from enacting any egg-labeling requirements, regardless of
whether it was possible to compose such a requirement in such a way as
to  withstand Dormant  Commerce Clause  scrutiny.   In addition,  in  
1052(b)(2), Congress indicated a preference for  Puerto Rico and other
noncontiguous  areas of  the United  States by  specifically exempting
them from its blanket prohibition on egg-labeling.

                                  6

before  it  the  whole  subject  of  egg-labeling,  its  exemption  of

noncontiguous  jurisdictions  must  be   understood  to  signify,   by

implication,  Congressional  approval  of  any  and  all  egg-labeling

requirements  in   those  places   regardless  whether   justified  or

unjustified by Dormant Commerce Clause considerations.  But this seems

to us a  more extreme  reading than either  the statutory language  or

legislative   history   necessitates.3      Absent,   at   least,   an

affirmatively   stated   grant   of   permission    to   noncontiguous

jurisdictions  of the  United States  to require egg-labeling,  we are

unable  to conclude that appellants  have met their  burden of showing

that Congress' intent to allow Puerto Rico to enact protectionist egg-

labeling  regulations was "unmistakably clear."   See e.g.,   Maine v.                                                                           

Taylor,  477 U.S.  131, 139  (1986) (holding  that state  statutes are              

exempt "from  the implied  limitations of  the [Commerce]  Clause only

when  the congressional  direction  to do  so  has been  'unmistakably

clear'");    South-Central, 467  U.S. at  90  (finding that  "on those                                  

occasions  in which consent  has been found,  congressional intent and
                                                

    3The  legislative history  of    1052(b)(2) is  silent on  whether
Congress  intended  to immunize  regulations  like  section X(F)  from
Dormant Commerce Clause scrutiny.  It  is true that the United  States
Department  of Agriculture,  arguing in  opposition to  the exemption,
stated  that   1052(b)(2)'s "exemption would allow ... Puerto Rico ...
to  require  eggs shipped  from the  continental  United States  to be
labeled" and therefore recommended  eliminating the exemption in order
to  "eliminate trade  barrier labeling requirements."   H.R.  Rep. No.
1670, 91st  Cong., 2nd  Sess. (1970).   We  are, however, unsure  what
weight, if any, to accord to the Department's position, given that the
Department  did not expressly refer to the Dormant Commerce Clause and
given that Congress decided to exempt noncontiguous jurisdictions from
its  prohibition   on  egg-labeling  in  spite   of  the  Department's
objection.  

                                  7

policy to insulate state legislation from  Commerce Clause attack have

been  'expressly stated'").   We  agree with  the district  court that

"[a]lthough  the  E.P.I.A. permits  noncontiguous  areas  to impose  a

labeling requirement,  the statute does not permit  such a requirement

to be  imposed in  a manner  that discriminatorily  burdens interstate

commerce."

III. Dormant Commerce Clause Analysis        III. Dormant Commerce Clause Analysis

    Having  determined  that  section  X(F)  was  not  Congressionally

authorized in  such a fashion  as to exempt  it from  Dormant Commerce

Clause  scrutiny altogether, we  turn to the  question whether section

X(F)  violates  the  Clause.   We  must  decide  whether section  X(F)

discriminates  against  interstate   commerce  by   disproportionately

impairing out-of-state commerce,  and, if so, whether  Puerto Rico can

justify such discrimination.  Trailer Marine, 977 F.2d at 10-12.                                                    

    A regulation that  discriminates against  interstate commerce  may

be  facially  discriminatory  or  may  be  neutral  on  its  face  but

discriminatory in effect.  Pike  v. Bruce Church, Inc., 397 U.S.  137,                                                              

142  (1970).   Here,  the Puerto  Rico  Department of  Agriculture has

promulgated a regulation which imposes a burden on other United States

jurisdictions -- namely, egg-labeling -- that is not imposed on Puerto

Rico.  The record amply supports the district court's finding that "if

enforced,  [section] X(F)  would impose  on mainland  and foreign  egg

                                  8

producers significant  costs not imposed on  Puerto Rican producers."4

Thus, section X(F) facially discriminates against interstate commerce.

    Because section  X(F) discriminates  against interstate  commerce,

the burden falls on  appellants to show  that it "serves a  legitimate

local   purpose"  that   could   not  be   served  "as   well  without

discriminating against interstate commerce."   Hughes v. Oklahoma, 441                                                                         

U.S. 332,  336 (1979).   Appellants argue that  section X(F) serves  a

legitimate  state interest  in protecting  the health of  Puerto Rican

consumers.    They  argue  that  imposing a  labeling  requirement  on

imported eggs will enable authorities to remove from supermarkets eggs

produced in a geographic area known to be the source of an outbreak of

salmonella  poisoning.   However,  appellants failed  to support  this

assertion with any evidence showing (1) whether there is a substantial

problem with  salmonella  in  eggs;  (2) whether  egg-labeling  is  an

efficient way to  trace contaminated eggs;5  (3) whether section  X(F)
                                                

    4The evidence  produced below  tended  to show  that section  X(F)
would increase the market price of eggs imported into Puerto Rico from
other  United  States  jurisdictions,  to the  advantage  of  locally-
produced eggs.  For  example, the Vice President of  Radlo Brothers, a
company which exports  eggs to Puerto Rico, testified that in order to
comply with section  X(F) he would have to purchase  new machinery for
each of his thirty-five  locations from which he ships eggs  to Puerto
Rico.   He further testified  that such egg-labeling  would hinder his
ability to satisfy his other  clients' emergency needs, because  these
clients would likely not accept labeled eggs.  

    5The utility  of egg-labeling as a  means of tracing  contaminated
eggs is not self-evident.   Testimony by the Vice President of  United
Egg Producers described  a process  by which tainted  eggs are  traced
back to the farm that produced them through the standard documentation
already used by packers and producers.

                                  9

was  passed with  the purpose  of tracing  contaminated eggs;  and (4)

whether eggs imported  from elsewhere  in the United  States are  more

likely to be contaminated than eggs imported from other countries that

need  only be  labeled "foreign."   We  therefore accept  the district

court's finding that  appellants "did not offer  evidence proving that

the discriminatory burden of [section] X(F) is justified by any factor

'unrelated  to  economic protectionism.'"    See  New  Energy  Co.  v.                                                                          

Limbach, 486 U.S. 269, 274 (1988).  We hold that section X(F) violates               

the  Dormant Commerce  Clause, and  affirm the  order of  the district

court  granting  a permanent  injunction  against  the enforcement  of

section X(F).

So Ordered.        So Ordered.                   

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