“Seinfeld bill” held unconstitutional

7 Jan 2013

In the flurry of year end errands, I failed to report on this.  Many of us remember the episode of Seinfeld, where Kramer and Newman schemed to take New York cans and bottles to Michigan to effect “bottle deposit arbitrage” by getting deposit reimbursements for bottles and cans on which no deposit had been paid.  The scheme didn’t work, but a 1998 study which reported up to $30 Million in such fraud annually and an actual fraud ring inspired the Michigan legislators to amend Michigan’s bottle bill to try to prevent such shenanigans.

In 2008, the bottle bill law was amended, among other things,  to require bottlers to put a “unique mark” on beverage containers sold in Michigan to allow reverse vending machines to determine if a container was from Michigan. Also, such mark could be used only in Michigan “and 1 or more other states that have laws substantially similar to this act.”  “Reverse vending machines” are the automated self-service bottle return devices you see at many supermarkets these days.

This law was challenged as a Michigan intrusion into interstate commerce under the so-called “dormant commerce clause” of the US Constitution.  The Constitution grants the US Congress power to regulate commerce among the States.  The “dormant” part of the dialogue  deals with what happens when Congress has been silent on the topic.  There is a whole body of case law that interestingly has dealt with State and local regulation of solid waste and other activities when Congress hasn’t acted.

The Sixth Circuit Court of Appeals held that the requirement of the unique mark was not discriminatory because it applied to both Michigan and non-Michigan bottlers. But the Court also held that the requirement that the mark could not be used on bottles in other states except with similar bottle laws regulated commerce outside of Michigan and so violated the doctrine against extraterritorial application of laws, rendering it invalid.

One of the Judges, while agreeing, wondered whether the extraterritoriality doctrine should continue to be followed, noting the indirect (and therefore valid) state specific requirements of California (auto emissions), Ohio (milk labels), Vermont (light bulb labels warning of mercury dangers) and so on.

Leave a Comment Below

Leave a Reply