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Challenges to State E-Waste Laws Face Tough Battle

April 22, 2016

On March 31, 2016, a federal district court in Connecticut rebuffed a broad constitutional challenge to that state’s “market share”-based TV recycling program.[1] Vizio v. Klee is the latest in a growing number of cases where courts have upheld product stewardship programs alleged to violate the U.S. Constitution.[2]

Like earlier cases, Vizio’s challenge raised what are characterized as “dormant commerce clause” issues. That is, Vizio alleged that the state’s program had impermissible effects outside Connecticut and hampered competition. In addition, Vizio also raised equal protection clause challenges. It alleged that, because its products are newer and are lighter than many older televisions it was being held responsible for recycling, Connecticut’s TV recycling program required the company to recycle unfairly high volumes of TVs.[3]

Although the court ultimately rejected Vizio’s arguments, they lay bare an ongoing challenge in product stewardship programs generally: how can states allocate e-waste stewardship responsibilities fairly when consumer technology changes rapidly, and when the makeup of material entering the recycling stream does not reflect the makeup of material currently offered in the marketplace? Connecticut’s current market share-based solution for TVs may not satisfy industry challengers, but at least this court believes that it is sufficient to meet the “rational basis review” standard that has been applied to commercial enterprises for equal protection challenges. And that test appears unlikely to change.

The Connecticut E-Waste Law for TVs

Under the Connecticut e-waste law[4], the number of pounds of TVs a TV manufacturer is required to recycle in a given year is calculated by reference to the manufacturer’s “market share.”[5] The Connecticut Department of Energy and Environmental Protection (DEEP) issued regulations stating that a manufacturer’s market share is its share of the number of TV units sold nationally in a prior year.[6] For example, assume that recyclers collected 10 million pounds of covered TVs in Connecticut in 2015. Assume further that 10 million TV units were sold in the U.S. in 2014 and that a TV manufacturer subject to Connecticut’s e-waste law sold 2 million, or 20 percent, of those 10 million units. In allocating recycling responsibilities in Connecticut for 2015, the TV manufacturer would be responsible for recycling 2 million pounds of TVs, or 20 percent of the total weight of TVs collected in 2015. This rule applies regardless of the total weight of TVs that were actually collected for recycling in 2015 or the total weight of TVs sold by the manufacturer—nationally or in Connecticut—in 2014.

At least with respect to TVs, Connecticut’s allocation approach differs from those used in many other states. Many of those calculate the total number of pounds of TVs that an obligated manufacturer sells in a prior year, and allocate recycling responsibilities on the basis of the proportion of those pounds to the total number of pounds of TVs sold in the prior year.[7] For other covered electronic devices, Connecticut is similar to many other states in that it allocates recycling responsibility by reference to a manufacturer’s “return share,” or the share of devices that are actually returned for recycling.[8]

Vizio’s Challenge to the Connecticut E-Waste Law

For Vizio, the problem with Connecticut’s “market share” approach is that many of the TVs brought in for recycling are far heavier than those sold by manufacturers currently obligated to recycle them. Basing a recycling allocation on the number of units sold in a prior year (as opposed to the number of pounds sold or number of pounds actually returned for recycling), the market share approach raises the possibility that that measurement will not be a meaningful proxy for the number of pounds of recycled materials those units represent. Where, as here, there is a significant difference between the weight of products sold 10 years ago and the weight of products sold last year, there is a potential mismatch between a company’s current contribution to the future e-waste problem and its current responsibility for dealing with an e-waste problem that started in the past.

This is precisely the issue faced by Vizio. The company is relatively new. It makes flat-screen TVs, and it has never sold older TVs or monitors that contain far heavier cathode ray tubes (CRTs). In its complaint, Vizio alleged that because CRT-containing products are often as much as 10 times heavier, on a per unit basis, than its own lighter flat-screen products, it was being subject to recycling costs far in excess of what it would be if the recycling obligation was based on actual weight of its products returned for recycling (its “return share”). Vizio argued that such a disparity discriminated against new TV manufacturers in favor of older TV manufacturers, and against all TV manufacturers in favor of manufacturers of other electronic devices covered under the act, whose recycling obligations are calculated by reference to their return shares only.[9]

In its motion to dismiss the case, the DEEP argued that the market share allocation method it uses to determine recycling responsibility is facially neutral and thus constitutional. That is, it does not single-out any particular product category or manufacturer.[10] the DEEP argued that the market based mechanisms are best where products, such as TVs, have a longer useful life and because TV manufacturers more frequently enter and leave the market in comparatively short periods of time.[11] If a manufacturer of a TV is no longer in business at the time the TV is brought in for recycling, then there would be no one responsible for paying for the recycling under a “return share” model.

The DEEP argued further that its market share model benefits consumers and the public because its “pay it forward” approach accounts for the likelihood that today’s market participants — and today’s parties responsible for recycling — may not be in the market in the future when their products reach the end of their useful life and are themselves brought in for recycling.[12] The DEEP summed up its view of Vizio’s complaint as follows: “[The] plaintiff’s complaint ... boils down to little more than the speculative possibility that the total weight that [the] plaintiff is actually charged to recycle over time will exceed the total weight of its own products that are recycled over time.”[13] The DEEP argued that states are not required to ensure that such exact parity between these weights will result.

The Court’s Decision

The district court agreed with the DEEP. With respect to Vizio’s equal protection claims, the court opined that the state had to provide only a “plausible policy reason” in favor of the market-based approach in order for the e-waste regulation to pass muster.[14] The court ruled that, given the different market dynamics at play for TV and other manufactures, Vizio “failed to allege the existence of any ... factors that would tend to demonstrate that TV manufacturers and other ... manufacturers are similarly situated for the purposes of the e-waste law.”[15]

The court also ruled that Connecticut’s market share-based TV recycling program did not impose differential treatment on old and new TV manufacturers in a manner that failed rational basis review.[16] The mere fact that new TV manufacturers may be required to pay more per pound for recycling than old TV manufacturers is not enough for a successful equal protection challenge, the court ruled, where, as here, the state provided plausible reasons for doing so. Those included, the court found, to ensure that no manufacturer escapes its recycling responsibilities, and to deal with “orphan shares” of TVs, the manufacturers of which are no longer in business at the time the TVs are recycled.[17]

Looking Forward

It is too soon to tell whether Vizio will file an appeal. We will likely continue to see heavier CRT TVs and monitors make their way into recycling stream over the next several years, however, and, given the state of the TV marketplace, the burdens of recycling these products may continue to fall differentially on manufacturers who are selling lighter, more environmentally responsible products. Given the relatively easy standard states have to meet to show that such differential burdens meet important state interests, it's not at all clear that future challenges to product stewardship programs on equal protection bases will be successful at the trial court level, at least when, as in Connecticut, the statutory language specifies a facially neutral basis for assigning responsibilities.

It may take an appellate or even a Supreme Court decision to provide any indication that future cases could succeed. Given how rapidly and unexpectedly technological developments occur, today’s manufacturers of lighter and nimbler electronic products may soon themselves be viewed as the burdensome behemoths that drag down future startups and innovators. We can only wait and see.

[1] Vizio v. Klee, Ruling on Motion to Dismiss, Case No. 15-cv-00929 (D. Conn. March 31, 2016 ), ECF No. 36.

[2] See, e.g., Pharmaceutical Research and Manufactures of America, et al. v. County of Alameda, 768 F.3d 1037 (9th Cir. 2014) (upholding Alameda County’s unused pharmaceutical drug stewardship ordinance).

[3] Vizio also alleged that the method of allocating responsibility for recycling TVs unfairly burdened TV manufacturers generally. See Vizio v. Klee, Complaint at 25 (D. Conn. June 17, 2015), ECF No. 1. Similar equal protection challenges were raised against New York City’s e-waste law, but no decision was ever rendered: that case was settled when the state passed its own superseding e-waste legislation. See Consumer Electronics Association, et al. v. City of New York, et al., Complaint, Case No. 09-cv-6583 (S.D.N.Y July 24, 2009), ECF No. 1; Stipulation of Voluntary Dismissal and Settlement (June 28, 2010), ECF No. 79.

[4] Conn. Gen. Stat. §§ 22a-629 through 22a-640.

[5] Conn. Gen. Stat. § 22a-631.

[6] Conn. Agencies Regs. § 22a-638-1(g)(2).

[7] See, e.g., S.C. Code § 48-60-50.

[8] See Conn. Agencies Regs. § 22a-638-1(g)(1)(C) and (j)(3).

[9] See Vizio v. Klee, Complaint at 24-26; Memorandum of Law in Opposition to Motion to Dismiss at 34-35 (ECF No. 24).

[10] Vizio v. Klee, Motion to Dismiss at 34-35 (ECF No. 21).

[11] Motion to Dismiss at 4.

[12] Id. at 4-5.

[13] Id. at 6 (emphasis in original).

[14] Ruling on Motion to Dismiss at 35.

[15] Id. at 36-37.

[16] Id. at 37-39.

[17] Id. at 40.