johnson & johnson appeal to 10th circuit

8/20/2019 Johnson & Johnson appeal to 10th Circuit

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No. 15-4071

IN THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

________________

JOHNSON & JOHNSON VISION CARE, I NC.,

Plaintiff-Appellant ,

v.

SEAN D. R EYES, in his official capacity as Attorney General of Utah

Defendant-Appellee

and

1-800 CONTACTS, I NC.; COSTCO WHOLESALE CORPORATION

Intervenors-Appellees

________________

On Appeal from the United States District Court

for the District of Utah (Benson, J., No. 2:15-cv-00252)

Oral Argument Scheduled for August 27, 2015

________________

OPENING BRIEF OF PLAINTIFF-APPELLANT

JOHNSON & JOHNSON VISION CARE, INC.

________________

Jerome A. Swindell

Assistant General CounselJOHNSON & JOHNSON

One Johnson & Johnson

Plaza

New Brunswick, NJ 08933

(732) 524-3965

Kenneth B. Black

Timothy K. CondeSTOEL R IVES LLP

201 South Main Street,

Suite 1100

Salt Lake City, Utah 84111

(801) 328-3131

Jonathan F. Cohn

Ken GlazerKwaku A. Akowuah

SIDLEY AUSTIN LLP

1501 K Street, N.W.

Washington, DC 20005

(202) 736-8110

Appellate Case: 15-4073 Document: 01019451233 Date Filed: 06/26/2015 Page: 1


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CORPORATE DISCLOSURE STATEMENT

Pursuant to Federal Rule of Appellate Procedure 26.1, Plaintiff-Appellant

Johnson & Johnson Vision Care, Inc., makes the following disclosure:

Johnson & Johnson Vision Care, Inc., is a wholly-owned subsidiary of

Johnson & Johnson.

Respectfully submitted,

/s/ Jonathan F. Cohn

Jonathan F. CohnSIDLEY AUSTIN LLP

1501 K Street, N.W.

Washington, D.C. 20005

Telephone: (202) 736-8110

Facsimile: (202) 736-8711

Dated: June 26, 2015



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i

TABLE OF CONTENTS

TABLE OF AUTHORITIES ................................................................................... iii

STATEMENT OF RELATED CASES ................................................................. viii

JURISDICTIONAL STATEMENT .......................................................................... 1

ISSUE PRESENTED FOR REVIEW ....................................................................... 1

CONSTITUTIONAL AND STATUTORY PROVISIONS ...................................... 2

STATEMENT OF THE CASE .................................................................................. 3

A. Factual Background ............................................................................... 3

B. The District Court Litigation ................................................................. 7

C. Prior Proceedings On This Appeal ...................................................... 10

SUMMARY OF ARGUMENT ............................................................................... 11

STANDARD OF REVIEW ..................................................................................... 15

ARGUMENT ........................................................................................................... 16

I. The District Court Misapplied Established Standards for Weighing Pre-Enforcement Constitutional Challenges to Statutes ...................................... 16

II. The District Court Misapplied Established Commerce Clause

Standards ........................................................................................................ 19

A. The District Court Erred in Failing To Apply the “Direct

Regulation” Prong of the Commerce Clause Analysis ....................... 21

B. The District Court Erred in Treating Section 905.1’s Patently

Extraterritorial Effects as Likely Permissible ..................................... 24

C. The District Court Erred In Seeking to Justify Section 905.1’s

Facial Discrimination Against Interstate Commerce .......................... 28

1. Section 905.1 discriminates against both out-of-state

manufacturers and out-of-state retailers ................................... 28



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2. The district court erred in finding that Section 905.1

could not be discriminatory because it is an antitrust

statute ........................................................................................ 31

D. The District Court Overlooked the Plainly Excessive Burden

That Section 905.1 Imposes on Interstate Commerce ......................... 36

III. The District Court Misapplied The Remaining Elements of the

Injunction Standard ........................................................................................ 39

A. JJVCI Demonstrated That It Would Suffer Irreparable Harm As

A Matter of Law .................................................................................. 39

B. JJVCI Demonstrated That the Balance of Equities And Public

Interest Weigh Strongly In Favor of a Preliminary Injunction ........... 41

CONCLUSION ........................................................................................................ 43



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iii

TABLE OF AUTHORITIES

Page(s)

Cases

ACLU v. Johnson,

194 F.3d 1149 (10th Cir. 1999) .................................................................... 26, 39

Am. Trucking Ass’ns v. Scheiner ,

483 U.S. 266 (1987) ...................................................................................... 41, 42

Awad v. Ziriax,

670 F.3d 1111 (10th Cir. 2012) .......................................................................... 41

Baldwin v. GAF Seelig, Inc.,

294 U.S. 511 (1935) ................................................................................ 25, 27, 33

Beach Commc’ns, Inc. v. F.C.C.,

959 F.2d 975 (D.C. Cir. 1992) ............................................................................ 16

Bhd. of Maint. of Way Employes Div./IBT v. Union Pac. R.R. Co.,

460 F.3d 1277 (10th Cir. 2006) .......................................................................... 15

Bos. Stock Exch. v. State Tax Comm’n,

429 U.S. 318 (1977) ...................................................................................... 12, 23

Brown-Forman Distillers Corp. v. New York State Liquor Auth.,

476 U.S. 573 (1986) ..................................................................................... passim

Buckley v. Valeo,

424 U.S. 1 (1976) ................................................................................................ 16

C&A Carbone, Inc. v. Town of Clarkstown,

511 U.S. 383 (1994) .......................................................................... 12, 22, 23, 33

California v. ARC America,490 U.S. 93 (1989) .............................................................................................. 32

Chamber of Commerce of U.S. v. Edmondson,

594 F.3d 742 (10th Cir. 2010) ...................................................................... 40, 41

Chavez v. Whirlpool Corp.,

93 Cal. App. 4th 363 (Cal. Ct. App. 2001) ......................................................... 34



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iv

City of Philadelphia v. New Jersey,

437 U.S. 617 (1978) ...................................................................................... 12, 23

Comptroller of the Treasury of Md. v. Wynne,

135 S. Ct. 1787 (2015) ............................................................................ 19, 26, 33

Copperweld Corp. v. Independence Tube Corp.,

467 U.S. 752 (1984) ...................................................................................... 14, 39

Edgar v. MITE Corp.,

457 U.S. 624 (1982) ...................................................................................... 12, 22

Exxon Corp. v. Governor of Maryland ,

437 U.S. 117 (1978) ...................................................................................... 31, 32

Foster-Fountain Packing Co. v. Haydel ,278 U.S. 1 (1928) .......................................................................................... 12, 23

Geneva Pharms. Tech. Corp. v. Barr Labs, Inc.,

386 F.3d 485 (2d Cir. 2004) ............................................................................... 38

Globe Glass & Mirror Co. v. Brown,

917 F. Supp. 447 (E.D. La. 1996) ....................................................................... 33

Granholm v. Heald ,

544 U.S. 460 (2005) ............................................................................................ 29

Greater Yellowstone Coal. v. Flowers,

321 F.3d 1250 (10th Cir. 2003) .......................................................................... 15

Healy v. Beer Inst., Inc.,

491 U.S. 324 (1989) ..................................................................................... passim

Hobby Lobby Stores, Inc. v. Sebelius,

723 F.3d 1114 (10th Cir. 2013) .......................................................................... 15

Holder v. Humanitarian Law Project ,561 U.S. 1 (2010) .......................................................................................... 18, 19

Hughes v. Oklahoma,

441 U.S. 322 (1979) ................................................................................ 23, 29, 36



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Hunt v. Wash. State Apple Adver. Comm’n,

432 U.S. 333 (1977) ............................................................................................ 33

Johns v. Stewart ,

57 F.3d 1544 (10th Cir. 1995) ............................................................................ 40

Kan. Health Care Ass’n v. Kan. Dep’t of Soc. & Rehab. Servs.,

31 F.3d 1536 (10th Cir. 1994) ............................................................................ 40

Kansas Judicial Review v. Stout ,

519 F.3d 1107 (10th Cir. 2008) .................................................................... 17, 35

Kleinsmith v. Shurtleff ,

571 F.3d 1033 (10th Cir. 2009) .......................................................................... 20

KT&G Corp. v. Att’y Gen. of Okla.,535 F.3d 1114 (10th Cir. 2008) .............................................................. 20, 29, 36

Leegin Creative Leather Prods., Inc. v. PSKS, Inc.,

551 U.S. 877 (2007) ............................................................................................ 38

MedImmune, Inc. v. Genentech, Inc.,

549 U.S. 118 (2007) ................................................................................ 12, 18, 19

New Energy Co. of Ind. v. Limbach,

486 U.S. 269 (1988) ...................................................................................... 31, 33

New England Power Co. v. New Hampshire,

455 U.S. 331 (1982) ............................................................................................ 22

Nken v. Holder ,

556 U.S. 418 (2009) ............................................................................................ 41

Oneok, Inc. v. Lear-Jet, Inc.,

135 S. Ct. 1591 (2015) ............................................................................ 14, 34, 39

Or. Waste Sys., Inc., v. Dep’t of Envtl. Quality,511 U.S. 93 (1994) ........................................................................................ 23, 36

People v. Tempur-Pedic Int’l, Inc.,

95 A.D.3d 539 (N.Y. App. Div. 2012) ............................................................... 34



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Pharm. Research & Mfrs. of Am. v. Dist. of Columbia,

406 F. Supp. 2d 56 (D.D.C. 2005), aff’d sub nom. Biotech. Indus.

Org. v. Dist. of Columbia, 496 F.3d 1362 (Fed. Cir. 2007) ............................... 33

Pike v. Bruce Church, Inc.,

397 U.S. 137 (1970) ...................................................................................... 36, 37

PSKS, Inc. v. Leegin Creative Leather Products, Inc.,

615 F.3d 412 (5th Cir. 2010) .............................................................................. 34

Quik Payday, Inc. v. Stork ,

549 F.3d 1302 (10th Cir. 2008) .................................................................... 16, 37

Shafer v. Farmers Grain Co.,

268 U.S. 189 (1925) ............................................................................................ 22

Smith Mach. Co., Inc. v. Hesston Corp.,

878 F.2d 1290 (10th Cir. 1989) .......................................................................... 38

Southern Pac. Co. v. Arizona ex rel. Sullivan,

325 U.S. 761 (1945) ............................................................................................ 30

Terrace v. Thompson,

263 U.S. 197 (1923) ............................................................................................ 18

United Haulers Ass’n v. Oneida-Herkimer Solid Waste Mgmt. Auth.,

550 U.S. 330 (2007) ...................................................................................... 28, 30

United States v. Colgate & Co.,

250 U.S. 300 (1919) ............................................................................................ 34

V-1 Oil Co. v. Utah State Dep’t of Pub. Safety,

131 F.3d 1415 (10th Cir. 1997) .......................................................................... 37

Vill. of Hoffman Estates v. Flipside, Hoffman Estates, Inc.,

455 U.S. 489 (1982) ............................................................................................ 16

W. Lynn Creamery, Inc. v. Healy,

512 U.S. 186 (1994) ..........................................................................20, 29, 31, 33

Westman Comm’n Co. v. Hobart Int’l., Inc.,

796 F.2d 1216 (10th Cir. 1986) .......................................................................... 38



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Ex parte Young ,

209 U.S. 123 (1908) ............................................................................................ 17

Statutes

Or. Rev. Stat. Ann. § 650.205 .................................................................................. 34

R.I. Gen Laws § 5-55-4 ............................................................................................ 34

Utah Code Ann. § 13-14-201 ................................................................................... 34

Utah Code § 58-16a-904 .......................................................................................... 35

Utah Code § 58-16a-905.1 ................................................................................ passim

Utah Code § 58-16a-906 ...................................................................................... 2, 21

Other Authorities

16 C.F.R. § 315.5 ....................................................................................................... 3

James Rowley, “Ping, Golf Club Maker, to Benefit From Court

Ruling (Update1),” Bloomberg (Jul. 12, 2007), available at

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aw

SNQOivaoWs&refer=us ....................................................................................... 5

Martin Moylan, “Apple among brands in pricing tension withretailers,” MPRNews (Dec. 4, 2012), available at

http://www.mprnews.org/story/2012/12/04/business/competitive-

retail-pricing-policy; ............................................................................................. 5



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STATEMENT OF RELATED CASES

The district court order under appeal is also the subject of the pending

appeals captioned Alcon Laboratories, Inc. v. Reyes, No. 15-4072, and Bausch &

Lomb Incorporated v. Reyes, No. 15-4073, which were initiated on the same day as

this appeal (May 12, 2015).



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JURISDICTIONAL STATEMENT

The district court has jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1343.

The district court denied Appellant’s motion for a preliminary injunction on May

11, 2015. Appellant timely filed a notice of appeal on May 12, 2015. This Court’s

jurisdiction over this interlocutory appeal rests on 28 U.S.C. § 1292(a)(1).

ISSUE PRESENTED FOR REVIEW

Manufacturers set the retail prices for numerous consumer goods in

interstate commerce, including iPhones, televisions, golf clubs, luxury fashion

products, and contact lenses. Under the law of 49 states, manufacturers are free to

terminate sales to retailers who refuse to sell at these prices. Interstate commerce

with recalcitrant retailers is not required.

The State of Utah, however, recently enacted a statute that compels specific

out-of-State manufacturers to sell products to in-State retailers who violate the

manufacturers’ pricing policies. The statute, Section 58-16a-905.1 of the Utah

Code (“Section 905.1”), is aimed exclusively at the contact lens industry and solely

at out-of-State manufacturers. It is undisputed that all contact lenses are

manufactured outside the State of Utah, and all of the burdens of Section 905.1 fall

on out-of-State interests. It is also undisputed that the statute benefits the business

model of a prominent in-State company, 1-800 CONTACTS.



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The question presented is whether Section 905.1 violates the dormant

Commerce Clause of the United States Constitution, and thus whether the district

court erred in denying Appellant’s preliminary injunction motion.

CONSTITUTIONAL AND STATUTORY PROVISIONS

The Commerce Clause of the United States Constitution provides:

“The Congress shall have Power . . . To regulate Commerce with foreign

Nations, and among the several States, and with the Indian Tribes.”

Utah Code Section 58-16a-905.1 provides:

“Contact lens manufacturer or distributor -- Prohibited conduct.

A contact lens manufacturer or a contact lens distributor may not:

(1) take any action, by agreement, unilaterally, or otherwise, that has the

effect of fixing or otherwise controlling the price that a contact lens retailer

charges or advertises for contact lenses; or

(2) discriminate against a contact lens retailer based on whether the contact

lens retailer:

(a) sells or advertises contact lenses for a particular price;

(b) operates in a particular channel of trade;

(c) is a person authorized by law to prescribe contact lenses; or

(d) is associated with a person authorized by law to prescribe contact

lenses.”

Utah Code Section 58-16a-906 in relevant part provides:

“Penalties for violations. * * * (2) The attorney general may bring a civil

action or seek an injunction and a civil penalty against any person who

violates a provision of Section . . . 58-16a-905.1.”



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STATEMENT OF THE CASE

A. Factual Background

Contact lenses are medical devices regulated by the federal Food and Drug

Administration. A-29. As such, they may be purchased only pursuant to a

prescription written by a licensed eye care professional. 16 C.F.R. § 315.5; A-29;

A-279; A-725. One hundred percent of contact lenses in the United States are

produced outside of Utah, and nearly all are produced by four out-of-State

manufacturers, A-82, three of whom are plaintiffs and appellants in this case:

Johnson & Johnson Vision Care, Inc. (“JJVCI”), Alcon Laboratories, Inc., and

Bausch & Lomb, Incorporated.

JJVCI is the largest manufacturer of contact lenses by market share in the

United States. A-296. JJVCI manufacturers its ACUVUE® lenses in Jacksonville,

Florida (where it is headquartered and incorporated) and Limerick, Ireland. Id. It

does not manufacture any contact lenses in Utah.

Ninety percent of JJVCI’s contact lens sales are made to distributors and

retailers outside of Utah. Id. Among the 10% that are sold to Utah businesses,

approximately 99% are made to 1-800 CONTACTS, id., which in turn sells 99%

of its lenses to customers outside of Utah. All in all, Utah consumers purchase

fewer than 1% of ACUVUE® lenses. Id.



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Before the summer of 2014, consumers who purchased ACUVUE® lenses

frequently encountered a burdensome two-step pricing system. First, the consumer

would pay an initial retail price upon purchasing the lenses. A-297. Second,

consumers who met certain qualifications could then redeem manufacturer’s

rebates to receive a discount from the purchase price. Id.

That approach to pricing did not work well for ACUVUE® consumers.

Only one-in-five consumers purchased enough contact lenses to be eligible for the

rebates. Id. Even among those eligible, only three-in-ten would actually complete

and mail the rebate form. Id. And even the small fraction of consumers who were

eligible for rebates and completed and mailed the necessary paperwork had to wait

roughly two months to receive their rebate payments. Id.

In the summer of 2014, JJVCI introduced its nationwide Unilateral Pricing

Policy (“UPP”). Id. The UPP eliminated manufacturer’s rebates and replaced

them with a nationwide minimum price—which was set below the pre-UPP

national average. A-298; A-301. Under the UPP, JJVCI will stop selling

ACUVUE® lenses to retailers who fail to charge the minimum price. A-298; A-

301. The UPP thereby makes life simpler for both the eye care professional and

the consumer. The eye care professional can devote more time to treating patients

and less time to monitoring prices and rebates offered by retailers, and the

consumer knows there is no need to shop around for a better bargain as long as the



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eye care professional is charging the minimum price. A-298. And because the

minimum price is lower than the pre-UPP national average sales price, the vast

majority of consumers pay lower net costs as a result of the UPP. Id.

Additionally, because JJVCI simultaneously reduced the wholesale price of

ACUVUE® lenses, id., retailers incur lower costs, too.

JJVCI’s UPP is far from unique. Manufacturers, rather than retailers, set

prices for iPhones, televisions, luxury fashion goods, golf clubs, and many other

diverse products.1 These pricing policies are just one piece of a broader reality that

the interests of manufacturers and retailers are not always aligned when it comes to

consumer purchases. Manufacturers and retailers have independent brand

identities, consumer bases, strategic goals, and financial pressures that may give

rise to differing views on how a product should be priced, advertised, or otherwise

presented for sale to consumers. The working out of those differential positions is

an intrinsic part of the free market, and sometimes leads a manufacturer to do

business only with retailers who will respect the manufacturer’s pricing goals.

1

See, e.g., Martin Moylan, “Apple among brands in pricing tension with retailers,”MPRNews (Dec. 4, 2012), available at

http://www.mprnews.org/story/2012/12/04/business/competitive-retail-pricing-

policy; James Rowley, “Ping, Golf Club Maker to Benefit From Court Ruling

(Update1),” Bloomberg (Jul. 12, 2007), available at

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=awSNQOivaoWs&r

efer=us.



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Some contact lens retailers, most notably 1-800 CONTACTS, oppose the

UPP and commenced a concerted lobbying effort at the federal level. Testifying

before a Senate subcommittee in July 2014, the general counsel for 1-800

CONTACTS recognized the national character of the contact lens market and

requested federal intervention. See A-488. Congress, however, chose not to

respond with legislation. No bill was ever introduced.

Undaunted, the retailers turned their attention to the states and lobbied them

to legislate the national contact lens industry. Most states rejected these efforts,

but one did not. Answering the call of its in-state favored son, the Utah legislature

passed Section 905.1 on March 10, 2015, and the Governor of Utah signed it into

law on March 27, 2015. The statute became effective on May 12, 2015.

1-800 CONTACTS describes itself modestly as “one of the initial supporters

of the legislation that became [Section 905.1].” A-470. In fact, Utah lawmakers—

both supporters and opponents of Section 905.1—recognized that the proposed law

was “targeted” to help “1-800 CONTACTS, a Utah-based business,” in a “turf

battle” with out-of-state contact lens manufacturers. See A-228 (Meeting of the

Utah Senate Business and Labor Standing Committee (Feb. 17, 2015)); A-83

(opponent of Section 905.1 praising 1-800 CONTACTS as “a company I think we

all revere . . . and are pleased to have in our State” and describing the proposed

legislation as being aimed at “things going on in the . . . market that are obviously



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disruptive to their business model”) (House Floor debate) (Mar. 10, 2015). The

law was “dubbed . . . the 1-800 bill.” A-93 (House Floor debate) (Mar. 10, 2015).

As enacted, the statute provides that a “contact lens manufacturer or a

contact lens distributor may not . . . take any action, by agreement, unilaterally, or

otherwise, that has the effect of fixing or otherwise controlling the price that a

contact lens retailer charges or advertises for contact lenses.” A-314. It also

provides that a contact lens manufacturer or distributor may not “discriminate

against a contact lens retailer” who “sells or advertises contact lenses for a

particular price.” Id. The state Attorney General may enforce these provisions by

bringing a civil action or seeking an injunction and civil penalty. Id.

B. The District Court Litigation

On April 13 and 14, 2015, JJVCI, Alcon, and Bausch & Lomb each filed a

complaint in the District of Utah seeking declaratory and injunctive relief. A-24;

A-249; A-259. The complaints alleged that Section 905.1 violated the Commerce

Clause. Together with their complaints, each manufacturer filed a motion for a

preliminary injunction. A-43; A-273; A-315. 1-800 CONTACTS and Costco

intervened in support of Section 905.1, and the actions were consolidated. A-9

(docket entry 26).

The district court held oral argument on May 5, 2015. A-785. At the

hearing, counsel from the Office of the Utah Attorney General struggled to



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articulate how the State of Utah construes the statute and substantially ceded the

floor to 1-800 CONTACTS. See A-841 – A-848. The State’s counsel responded

to the court’s requests for an explanation by refusing to “speculate” on

“hypotheticals.” A-845 – A-846. In particular, counsel was unable to say whether

Section 905.1 applies when 1-800 CONTACTS sells to consumers outside of

Utah.2

Nonetheless, the district court denied the manufacturers’ motions for a

preliminary injunction. A-775. Contrary to prevailing law, the court viewed the

State’s “uncertainty as to how and what extent the law will be enforced” as a

reason not to enjoin it. A-771. The court also failed to consider JJVCI’s primary

2 THE COURT: Well, it is a simple question. When 1-800 starts to sell

product they could claim, just singling them out because they seem to fit the

definition of a Utah retailer, and just looking at 1-800 Contacts, after thislaw goes into effect can tell these four manufacturers we want all the product

you will sell us. Then they claim under this law that they would be free to

sell it as a retailer at any price that they think they want to sell it at, correct?

MR. DOUGLAS: Correct.

THE COURT: Now, if they sell out of state and these manufacturers attempt

to impose their retail price program on them, because they are doing

something that they claim affects interstate commerce, and they have theright in that connection to do what Section 1 seems to forbid, will the Utah

Attorney General’s Office seek to punish them and to cite them and to get

civil penalties from them for violating this Act?

MR. DOUGLAS: I will answer that with a perhaps . . . .

A-846 – A-848 (emphasis added).



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contention that Section 905.1 directly regulates interstate commerce, and rejected

the arguments it did consider.

First, the district court found no “clear indication” that Section 905.1 would

have an extraterritorial effect—despite the fact that all contact lens manufacturers

and roughly 99% of contact lens consumers are located outside of Utah. A-766 –

A-767.

Second, the district court found no impermissible discrimination against out-

of-state interests, A-767, even though Section 905.1 favors in-state retailers over

out-of-state manufacturers as well as out-of-state retailers. The court reasoned that

Section 905.1 “is nothing more than a state antitrust statute, tailored to a specific

industry, which the state has the power to enact.” A-769. The court acknowledged

the manufacturers’ argument that Section 905.1 differs from a traditional antitrust

statute in that its “discrimination” provision requires out-of-state manufacturers to

ship contact lenses to “Utah retailers.” A-770. But the court found this argument

“premature and speculative,” in part because “[a]t oral argument, the Attorney

General’s representative expressed some uncertainty as to how and to what extent

the law will be enforced.” A-770 – A-771. The court declared that it would

“presume[] the Utah Attorney General will enforce the statute in a manner that

does not violate the Commerce Clause.” A-771.



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Third, the district court found no excessive burden on interstate commerce.

Id. The court held that, given the Attorney General’s equivocation about the scope

of the law, the apparent burdens were “no greater than the burden imposed by any

other state antitrust law.” A-772.

Finally, relying on its constitutional analysis, the district court held that the

other preliminary injunction factors weighed against issuance of a preliminary

injunction. See A-772 – A-774.

C. Prior Proceedings On This Appeal

JJVCI filed its notice of appeal on May 12, 2015, A-776, and moved the

same day for an injunction pending appeal. ECF No. 01019429905. The next day,

this Court temporarily enjoined enforcement of Section 905.1. ECF No.

01019430725. On June 12, 2015, this Court dissolved the temporary injunction,

denied the motion for an injunction pending appeal, and set an expedited briefing

schedule. ECF No. 01019444443.3 A special inter-term session of the Court has

been organized to hear argument on August 27, 2015.

3 Undersigned counsel hereby certify, pursuant to Rule 31.3(A)-(B) of the Tenth

Circuit Rules, that this separate brief is appropriate in light of the Court’s statement

in the June 12, 2015 Order that “[e]ach party may file its own brief,” in light of the

need for JJVCI to separately set out its distinct rationale for adopting a UPP, and in

light of the expedited briefing schedule ordered by the Court.



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SUMMARY OF ARGUMENT

Section 905.1 is unprecedented. It denies one specific group of disfavored

out-of-State companies a power commonly exercised by manufacturers

generally—the right to set the prices of their own products. The district court

committed several errors of law in refusing to enjoin this law.

As an initial matter, the district court drew the wrong inference from the

State’s refusal to take a position on the scope of Section 905.1. A court ordinarily

will defer to a narrowing construction offered by an enforcing agency. When no

such agency construction is forthcoming, it is incumbent on the court to adopt its

own construction of the law (whether or not identical to the plaintiff’s position)

and analyze the constitutional challenge in those terms. Here, the district court

instead held that any uncertainties about the scope of the law will have to wait until

Utah brings an enforcement action, and “ presume[d]” that whatever position Utah

takes in that enforcement action will conform to the Commerce Clause.

That is not how a pre-enforcement challenge brought under the Declaratory

Judgment Act is supposed to work. Plaintiffs demonstrated that they are at risk of

enforcement because Section 905.1 was specifically enacted to prohibit their UPPs

and require them to keep selling to Utah retailers. The State does not deny that

they are at risk. Plaintiffs are therefore entitled to a federal court adjudication of

their constitutional claim, prior to enforcement. The manufacturers need not “bet



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the farm” on the outcome of a state enforcement action in order to challenge an

unconstitutional law. See, e.g., MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118,

128-29 (2007) (citing cases).

The district court also committed four clear substantive errors in finding that

JJVCI was unlikely to succeed in its dormant Commerce Clause claim.

First , the district court failed even to address whether Section 905.1 is an

impermissible “direct regulation” of interstate commerce. As the Supreme Court

has held, a state may regulate interstate commerce only by way of laws “directed to

legitimate local concerns, with effects upon interstate commerce that are only

incidental .” City of Philadelphia v. New Jersey, 437 U.S. 617, 624 (1978)

(emphasis added); see also Edgar v. MITE Corp., 457 U.S. 624, 640 (1982)

(plurality) (“direct regulation is prohibited”). Utah cannot dictate special terms

that apply exclusively to a designated set of interstate transactions between out-of-

state manufacturers and in-state retailers. Nor may the State command that

commercial goods be sold within its borders. See, e.g., Bos. Stock Exch. v. State

Tax Comm’n, 429 U.S. 318, 336-37 (1977); C&A Carbone, Inc. v. Town of

Clarkstown, 511 U.S. 383, 392 (1994); Foster-Fountain Packing Co. v. Haydel ,

278 U.S. 1 (1928).

Second , the district court erroneously held that Section 905.1 is not

unconstitutional based on its extraterritorial effects. A state law may not have the



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“practical effect” of controlling commercial transactions that occur beyond its

borders. Healy v. Beer Inst., Inc., 491 U.S. 324, 336 (1989); see also Brown-

Forman Distillers Corp. v. New York State Liquor Auth., 476 U.S. 573, 580 (1986)

(“The mere fact that the effects of New York’s [alcohol law] are triggered only by

sales of liquor within the State of New York therefore does not validate the law if

it regulates the out-of-state transactions of distillers who sell in-state.”). Section

905.1 plainly violates this principle to the extent it applies to “the price that a

contact lens retailer charges or advertises for contact lenses” to consumers in other

States. That is, even if Section 905.1 could be justified insofar as it regulates the

prices paid by Utah consumers, it plainly goes too far in giving 1-800 CONTACTS

and other “Utah retailers” a free pass with respect to their sale or advertising

conduct in Arizona, Washington, Rhode Island, New York, or Florida—each of

which has declined to enact a proposed contact lens pricing law similar in kind to

Section 905.1. The statute goes even further insofar as the State chooses to define

“Utah retailer” to include any national retailer (such as Intervenor Costco) that has

distribution facilities in Utah.

Third , the district court erred in failing to find that Section 905.1

discriminates in favor of Utah’s in-state economic interests and against out-of-state

economic interests. Section 905.1 favors Utah retailers over out-of-state

manufacturers by taking the right to set prices away from the manufacturers and



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giving it to the retailers. The statute also favors Utah retailers over non-Utah

retailers by giving the former, but not the latter, a special exemption from

manufacturers’ pricing policies.

The district court excused these discriminatory effects by looking past the

specific features of Section 905.1 and characterizing the statute as a typical

antitrust law, but this too was error. Section 905.1 is unlike a typical antitrust law

in several ways—most notably, it is addressed to only one industry rather than “all

businesses in the marketplace,” see Oneok, Inc. v. Lear-Jet, Inc., 135 S. Ct. 1591,

1601 (2015), and it marks out for civil sanctions the very unilateral decision-

making that marketplace “competition assumes and demands.” Copperweld Corp.

v. Independence Tube Corp., 467 U.S. 752, 768-69 (1984). Further, no case holds

that a State may discriminate in favor of local businesses in order to pursue

purported “antitrust” policy. The dormant Commerce Clause does not take a

backseat to a state’s novel view of antitrust law.

Fourth, the district court erred in holding that the local benefits justify the

burdens on interstate commerce. Here again, the district court erred in assuming

that Section 905.1 was ordinary antitrust law and disregarding the State’s unique

attempt to affect prices in all 50 states.

Finally, the district court erred in ruling that the other preliminary injunction

factors weighed against injunctive relief. This error was derivative of the



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erroneous Commerce Clause ruling. There is no serious dispute that a law that

violates the dormant Commerce Clause must be enjoined.

For these reasons, this Court should reverse the decision below and hold that

a preliminary injunction should issue enjoining enforcement of Section 905.1.

STANDARD OF REVIEW

To obtain a preliminary injunction, the moving party must establish: “(1) a

likelihood of success on the merits; (2) a likely threat of irreparable harm to the

movant; (3) the harm alleged by the movant outweighs any harm to the non-

moving party; and (4) an injunction is in the public interest.” Hobby Lobby Stores,

Inc. v. Sebelius, 723 F.3d 1114, 1128 (10th Cir. 2013). This Court reviews the

denial of a motion for a preliminary injunction for abuse of discretion, id., and

examines the district court’s factual findings for clear error. Legal determinations,

in contrast, are reviewed de novo. Greater Yellowstone Coal. v. Flowers, 321 F.3d

1250, 1255 (10th Cir. 2003). “A district court necessarily abuses its discretion

when it commits an error of law,” and a preliminary injunction decision “that is

premised on an error of law is entitled to no deference and must be reversed.”

Bhd. of Maint. of Way Employes Div./IBT v. Union Pac. R.R. Co., 460 F.3d 1277,

1282 (10th Cir. 2006) (quotation marks omitted).



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ARGUMENT

I. The District Court Misapplied Established Standards for Weighing Pre-

Enforcement Constitutional Challenges to Statutes.

When a plaintiff brings a pre-enforcement challenge to the constitutional

validity of a statute, the usual course is that the agency charged with enforcing the

statute will construe the statute, articulating its scope. See, e.g., Vill. of Hoffman

Estates v. Flipside, Hoffman Estates, Inc., 455 U.S. 489, 494 n.5 (1982) (“In

evaluating a facial challenge to a state law, a federal court must, of course,

consider any limiting construction that a state court or enforcement agency has

proffered.”); Quik Payday, Inc. v. Stork , 549 F.3d 1302, 1308 (10th Cir. 2008)

(relying on representations by Kansas banking officials as to the reach of a state

law challenged on Commerce Clause grounds). If no such agency statement is

forthcoming, or if the court finds the agency’s construction implausible, the court

will construe the statute itself, including by applying the constitutional avoidance

canon as appropriate. See, e.g., Buckley v. Valeo, 424 U.S. 1, 80 (1976); cf. Beach

Commc’ns, Inc. v. F.C.C., 959 F.2d 975, 980-87 (D.C. Cir. 1992).

Here, neither event occurred. The Utah Attorney General did not say

whether Section 905.1 would require JJVCI to continue selling contact lenses

across state lines to “Utah retailers” that sell below the UPP minimum price. He

also did not state clearly whether the statute applies to sales that a “Utah retailer”

makes to consumers in other States.



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The district court also declined to provide an interpretation of the statute.

That is, while the district court cited canons of construction, A-767, A-771, it did

not actually apply those canons or otherwise adopt its own interpretation. Instead,

the district court adopted a blanket presumption that “the Utah Attorney General

will enforce the statute in a manner that does not violate the Commerce Clause,”

A-771, and indicated that the State should be permitted to “offer its interpretation

of the statute in connection with an actual enforcement action.” A-770.

This approach was directly contrary to the established rule that a plaintiff

does not have to risk state-court enforcement before it may go to federal court to

challenge the constitutionality of a “statute whose scope is unclear.” Kansas

Judicial Review v. Stout , 519 F.3d 1107, 1118 (10th Cir. 2008). Indeed, the

Supreme Court has held that plaintiffs threatened with unconstitutional state action

may bring pre-enforcement suits for injunctive relief against state officials in part

to ensure the availability of federal court review in circumstances much like these.

See Ex parte Young , 209 U.S. 123, 160-62, 165 (1908) (affirming federal

jurisdiction over pre-enforcement suit contending that Minnesota statute regulating

railroad shipping rates violated the Commerce Clause and Due Process).

That principle is not limited to statutes like the one at issue in Ex parte

Young , which are punishable by a term of imprisonment. In civil cases, too,

“where threatened action by government is concerned, [courts] do not require a



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plaintiff to expose himself to liability before bringing suit to challenge the basis for

the threat”; a plaintiff need not “bet the farm, so to speak” before bringing a

constitutional challenge to a civil law that threatens its property rights or liberty to

operate its business. See MedImmune, 549 U.S. at 128-29 (citing cases); see also

Terrace v. Thompson, 263 U.S. 197, 214 (1923) (courts may “enjoin the threatened

enforcement of a state law which contravenes the federal Constitution wherever it

is essential in order effectually to protect property rights and the rights of persons

against injuries otherwise irremediable”).

In keeping with this rule, the Supreme Court has indicated that an agency’s

refusal to say whether it would bring an enforcement action operates as an

admission, for purposes of the litigation, that the plaintiff’s planned conduct is

within the reach of the statute and would likely be a subject of an enforcement

action. For example, in Holder v. Humanitarian Law Project , 561 U.S. 1 (2010),

the Supreme Court addressed First Amendment and due process challenges to a

federal law banning the provision of “material support” to a designated “foreign

terrorist organization.” Id. at 9-10. The plaintiffs declared that they wished to

work together with certain designated organizations on non-violent aspects of their

activities, and claimed a constitutional right to do so. Id. at 14-15. The

government refused to say, either way, whether it would prosecute the plaintiffs if

they took such acts. Id. at 16. Faced with this circumstance, the Supreme Court



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held that the plaintiffs “should not be required to await and undergo a criminal

prosecution as the sole means of seeking relief.” Id. at 15 (internal quotation

marks omitted). The Court instead addressed the merits of the plaintiffs’

constitutional claims.

The district court should have followed a similar approach rather than

leaving JJVCI a “choice between abandoning [its] rights or risking prosecution.”

See MedIummune, 549 U.S. at 129. The district court’s flawed response to the

State’s equivocation compounded other errors in its constitutional analysis.

II. The District Court Misapplied Established Commerce Clause

Standards.

The dormant Commerce Clause doctrine has “deep roots” and plays a

critical role in the constitutional law of the United States. Comptroller of the

Treasury of Md. v. Wynne, 135 S. Ct. 1787, 1794 (2015). It reflects “the

Constitution’s special concern both with the maintenance of a national economic

union unfettered by state-imposed limitations on interstate commerce and with the

autonomy of the individual States within their respective spheres,” Healy, 491 U.S.

at 335-36, and thus “strikes at one of the chief evils that led to the adoption of the

Constitution, namely, state tariffs and other laws that burdened interstate

commerce.” Wynne, 135 S. Ct. at 1794.

Cases addressing the dormant Commerce Clause have at times employed

differing terminology in an effort to capture the many ways that a State can violate



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Commerce Clause strictures. In fact, this Court’s recent Commerce Clause cases

have alternatively described the Supreme Court’s precedents as applying a “two

tiered approach,” see Kleinsmith v. Shurtleff , 571 F.3d 1033, 1039 (10th Cir. 2009)

(quoting Brown-Forman, 476 U.S. at 578), or a three-prong analysis, see KT&G

Corp. v. Att’y Gen. of Okla., 535 F.3d 1114, 1143 (10th Cir. 2008). The precise

manner of grouping the Supreme Court’s controlling precedents is not critical

because the “Commerce Clause jurisprudence is not so rigid as to be controlled by

the form by which a State erects barriers to commerce. Rather our cases have

eschewed formalism for a sensitive, case-by-case analysis of purposes and effects.”

W. Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 201 (1994).

The ultimate question is whether Section 905.1 can be upheld as consistent

with the basic principles that a State cannot exercise its police powers in a manner

that, in “practical effect,” conflicts with (1) the exclusive power of Congress to

regulate the national economy or (2) the coordinate power of other States to

regulate matters within their own borders. See Healy, 491 U.S. at 336-37.

It cannot. Section 905.1 singles out one class of inherently interstate

transactions for regulation by Utah, and it mandates that out-of-state manufacturers

ship their products into Utah in order to benefit in-state retailers. The statute also

uniquely empowers “Utah retailers” to sell contact lenses to consumers in other

States at prices made possible only through the intervention of the Utah legislature.



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These “practical effects” bring Section 905.1 squarely into conflict with

established Commerce Clause principles.

A. The District Court Erred in Failing To Apply the “Direct

Regulation” Prong of the Commerce Clause Analysis.

It is undisputed that every single contact lens manufacturer is located outside

Utah. A-725. As interpreted by the State, Section 905.1 regulates commercial

conduct between these out-of-state manufacturers and “Utah retailers.” A-842. A-

850. The statute does not regulate any intrastate transactions. It is thus clear that

Section 905.1 directly regulates interstate commerce.

Moreover, the statute requires the sale of goods across state lines. The law

can be enforced against an out-of-state manufacturer only in one of two ways.

First, the “attorney general may . . . seek an injunction” compelling a contact lens

manufacturer to ship its products across state lines to an in-state retailer (or

forbidding it from declining to do so). See Utah Code Section 58-16a-906(2).

Second, the “attorney general may . . . bring a civil action” or “a civil penalty

against any person who violates” the statute by refusing to ship contact lenses

across state lines. Id .

This is a direct regulation of interstate commerce. Utah law is dictating the

terms of manufacturer-retailer transactions in a single industry in which every such

transaction that touches Utah crosses a state line, and is mandating that out-of-



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State manufacturers continue to sell goods to “Utah retailers” in circumstances

when they would otherwise stop.

Supreme Court precedent is clear that the statute is per se unconstitutional.

“When a state statute directly regulates or discriminates against interstate

commerce,” the Supreme Court has “generally struck down the statute without

further inquiry.” Brown-Forman, 476 U.S. at 579; see also Edgar , 457 U.S. at 640

(plurality) (“The Commerce Clause . . . permits only incidental regulation of

interstate commerce by the States; direct regulation is prohibited.”); Shafer v.

Farmers Grain Co., 268 U.S. 189, 199 (1925) (“a state statute which by its

necessary operation directly interferes with or burdens [interstate] commerce is a

prohibited regulation and invalid, regardless of the purpose with which it was

enacted”).4

Accordingly, “a State is without power to prevent privately owned articles of

trade from being shipped and sold in interstate commerce on the ground that they

are required to satisfy local demands or because they are needed by the people of

the State.” New England Power Co. v. New Hampshire, 455 U.S. 331, 338 (1982)

4

Some cases describe state regulation of the interstate movement of goods andservices as a “discriminate[ion] against interstate commerce,” see C&A Carbone,

511 U.S. at 390, whereas others speak of “direct regulation,” see Shafer , or use

both terms in the same breath. See Brown-Forman, 476 U.S. at 579. We use the

phrase “direct regulation” to more readily distinguish this form of forbidden

regulation from the distinct—but equally invalid—practice of discriminating in

favor of in-state entities. See Section II.C., infra.



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(striking down state constraint on export of hydroelectric power); see also Hughes

v. Oklahoma, 441 U.S. 322, 336-37 (1979) (ban on minnow export held invalid).

Nor may a State enact laws designed to keep out commercial goods that originate

in another State. See, e.g., Or. Waste Sys., Inc., v. Dep’t of Envtl. Quality, 511 U.S.

93 (1994); Philadelphia, 437 U.S. at 624 (“a law that overtly blocks the flow of

interstate commerce at a State’s borders” is the “clearest example” of law that is

per se invalid under the Commerce Clause).5

Likewise, a State may not use its regulatory powers to effect a “diversion of

interstate commerce” from other States to its own, as the Supreme Court held in

striking down a New York tax measure that sought to leverage New York’s “power

to tax an in-state operation as a means of requiring other business operations to be

performed in” New York. Bos. Stock Exch., 429 U.S. at 336-37; see also C&A

Carbone, Inc., 511 U.S. at 392 (striking down municipal law requiring trash

processing functions to be performed by local private company); Foster-Fountain

Packing Co. v. Haydel , 278 U.S. 1 (1928) (striking down Louisiana law aimed at

requiring relocation of shrimp processing services from Mississippi plant).

5 There is a narrow exception to this rule for quarantine measures aimed at “articles

such as diseased livestock that required destruction as soon as possible becausetheir very movement risked contagion and other evils,” and thus “did not

discriminate against interstate commerce as such, but simply prevented traffic in

noxious articles, whatever their origin.” Philadelphia, 437 U.S. at 628-29. Utah

does not claim that Section 905.1 supports any similar public health interest and

could not plausibly do so. Utah requires that contact lenses be shipped into the

state so 1-800 CONTACTS can ship them back out across the country.



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Section 905.1 is a more extreme version of the kind of law struck down in

Boston Stock Exchange. Rather than using tax policy to steer commercial traffic

toward local businesses, Utah has by fiat directed that contact lens manufacturers

must sell their products to “Utah retailers,” even if these “Utah retailers” sell those

lenses under terms that are inconsistent with the manufacturers’ respective

business objectives.

At the preliminary injunction hearing, the district court engaged in a lengthy

exchange with counsel for JJVCI on the prohibition against “direct regulation” of

interstate commerce by a State. See A-803 – A-806. Nonetheless, the district

court’s opinion failed to even mention “direct regulation.” Its failure to do so

warrants reversal. This is particularly true because neither the State nor

Intervenors has thus far responded in any meaningful way to this argument. That

is, despite much evasion and equivocation, they ultimately do not address, and

therefore do not deny, that Section 905.1 will in “practical effect” mandate cross-

border sales of contact lenses from JJVCI’s Florida manufacturing locations to 1-

800 CONTACTS and other “Utah retailers.” Section 905.1 is plainly

unconstitutional.

B. The District Court Erred in Treating Section 905.1’s Patently

Extraterritorial Effects as Likely Permissible.

The Supreme Court has long held that the dormant Commerce Clause is

violated when “the practical effect of the [state] regulation is to control conduct



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beyond the boundaries of the State.” Healy, 491 U.S. at 336 (emphasis added); see

also Brown-Forman, 476 U.S. at 583 (citing Southern Pac. Co. v. Arizona ex rel.

Sullivan, 325 U.S. 761, 775 (1945)). Just as “New York has no power to project its

legislation into Vermont by regulating the price to be paid in that state for milk

acquired there,” Baldwin v. GAF Seelig, Inc., 294 U.S. 511, 521 (1935), Utah has

no power to project its regulation into other states by regulating the price to be paid

there for contact lenses.

Yet Section 905.1 does precisely that: It bars out-of-state manufacturers

from taking actions that affect prices paid by out-of-state consumers. Neither

JJVCI nor any other contact lens manufacturer is based in Utah or makes any

business decisions in Utah. Further, approximately 99% of ACUVUE® lens sales

go to consumers outside the State of Utah. A-252. Indeed, about 99% of 1-800

CONTACTS sales of ACUVUE® lenses go to consumers in other states. Id.

Nonetheless, Section 905.1 purportedly controls actions taken outside Utah by

non-Utah manufacturers, in respect to sales to non-Utah consumers. Under any

practical understanding, that is an extraterritorial regulation.

The extraterritorial scope of the statute is compounded by the unnaturally

broad scope of the term “Utah retailer.” The State is somewhat coy about defining

what it means by “Utah retailer,” but it appears to view this term as encompassing

any retailer who sells or ships from a Utah location, such as Costco, which is a



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Washington-based company. See A-844 – A-848; A-407 – A-408. At argument,

1-800 CONTACTS contended that “Wal-Mart, Target, Sears, Walgreens” and

others were also “Utah retailers” because they “all are making retail sales in Utah,”

notwithstanding that every one of those companies is headquartered and based

outside of the State. A-850.

The mere existence of operational facilities in Utah is insufficient to shield

the statute from constitutional challenge. What matters is whether in “practical

effect” the statute regulates extraterritorially, not whether it also has some “nexus”

to the regulating state. In Wynne, for instance, Maryland had a clear taxing

“nexus” with respect to in-state residents, but the Supreme Court still struck down

its malapportioned tax levy. 135 S. Ct. at 1799 (emphasis added). Likewise, in

ACLU v. Johnson, 194 F.3d 1149 (10th Cir. 1999), this Court invalidated a New

Mexico statute regulating Internet communications despite a clear “nexus” to the

state. The State contended that the statute was addressed only to “intrastate

communications . . . from one New Mexican to another New Mexican,” and

therefore did not regulate extraterritorially. Id. at 1161. This proposed “nexus”

was held insufficient given “the nature of the Internet.” Id. Such a statute “cannot

effectively be limited to purely intrastate communications over the Internet

because no such communications exist.” Id.



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If an in-state nexus were sufficient, the laws struck down in Seelig , Healy,

and Brown-Forman all would have been upheld. In each case, the State could have

(and did) point to the fact that the challenged regulation was in formal terms

imposed on in-State conduct. For example, in Seelig , New York argued that it was

merely “prohibiting [the] sale” in New York of milk that had been purchased in

Vermont for the wrong price: “The importer in that view may keep his milk or

drink it, but sell it he may not.” Seelig , 294 U.S. at 521. The Supreme Court had

no trouble dispatching that argument because the practical effect was clear. New

York’s policy effectively and invalidly governed prices in Vermont.

The same is true here. The practical effect of Section 905.1 is to regulate the

prices that out-of-state consumers, in all 50 states, pay for contact lenses made by

an out-of state manufacturer. This extraterritorial effect is all the more pronounced

because 99% of ACUVUE® lenses are sold to consumers in other States.

To be sure, the Utah Attorney General refuses to confirm that it will enforce

Section 905.1 when sales are made to consumers outside of Utah. Compare A-407

(“[A] contact lens retailer located in the State of Utah that sells only to customers

who reside within the [S]tate of Utah falls within the statute’s purview. It is not a

violation of the Commerce Clause for the State of Utah to require contact lens

manufactures to allow an optometrist located in the State of Utah to set the prices

he or she wishes to sell contact lenses to the retailer’s Utah customers.”), with ECF



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No. 01019435806, at 12 (arguing that “there is no basis” for limiting Section 905.1

to Utah consumers), and A-486 (“I have to be dead honest with Your Honor that I

don’t know” whether Section 905.1 will be enforced based on prices paid by Utah

consumers). But the State does not deny that the statute reaches sales to out-of-

state consumers; and 1-800 CONTACTS avers that the statute does in fact apply to

those sales. See, e.g., A-455. The State’s equivocation about how it will enforce

the statute does not alter the scope of the statute itself, nor its “practical effect,”

which is to regulate the prices paid by out-of-state consumers for contact lenses

made by out-of-state manufacturers, purchased online from a “Utah retailer”, and

then shipped through interstate commerce to locations in other states. That plainly

amounts to an extraterritorial regulation, contrary to the district court’s conclusion.

See A-766—A767.

C. The District Court Erred In Seeking to Justify Section 905.1’s

Facial Discrimination Against Interstate Commerce.

1. Section 905.1 discriminates against both out-of-state

manufacturers and out-of-state retailers.

Section 905.1 also discriminates against interstate commerce, in violation of

the “virtually per se” rule that a State may not adopt laws that give rise to

“differential treatment of in-state and out-of-state economic interests that benefits

the former and burdens the latter.” See United Haulers Ass’n v. Oneida-Herkimer

Solid Waste Mgmt. Auth., 550 U.S. 330, 338 (2007). “This rule is essential to the



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foundations of the Union. . . . States may not enact laws that burden out-of-state

producers or shippers simply to give a competitive advantage to in-state

businesses.” Granholm v. Heald , 544 U.S. 460, 472 (2005).

A law that discriminates in these terms may be upheld only following “the

strictest scrutiny of any purported legitimate local purpose.” Hughes, 441 U.S. at

337. Critically, the “absence of nondiscriminatory alternatives” must also be

established as part of this strict scrutiny analysis, id., which is ultimately aimed at

examining whether the suspect act of “discrimination is demonstrably justified by a

valid factor” that is ”unrelated to economic protectionism.” KT&G Corp., 535

F.3d at 1143 (emphasis added). Section 905.1 plainly discriminates in favor of in-

state interests—i.e., “Utah retailers,” and just as plainly fails the resulting strict

scrutiny analysis. The district court erred in reaching a contrary conclusion. See

A-767 – A-771.

Section 905.1 discriminates in favor of Utah’s in-state economic interests in

two respects.

First , Section 905.1 takes pricing authority away from out-of-state

manufacturers and gives it to in-state retailers. It is irrelevant that the statute, “read

literally,” makes no facial distinction between in-state and out-of-state

manufacturers. A-767. A discriminatory “effect,” no less than discriminatory

wording, “renders [a state statute] unconstitutional.” W. Lynn Creamery, Inc., 512



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U.S. at 196; see also Healy, 491 U.S. at 336 (Commerce Clause inquiry focuses on

the “practical effect” of the challenged law); Brown-Forman, 476 U.S. at 583

(same); S. Pac. Co. v. Arizona ex rel. Sullivan, 325 U.S. 761, 775 (1945) (same).

Section 905.1 plainly discriminates in these terms. All manufacturers that lose

pricing authority are located in other States, and all retailers that gain pricing

authority have retail or shipping facilities inside Utah.

Second , Section 905.1 impermissibly confers on Utah retailers a special

exemption from manufacturers’ pricing policies that no other retailers enjoy.

JJVCI’s UPP, and the pricing policies of other manufacturers, apply nationwide to

all retailers, regardless of where they are located. Under Section 901.5,

manufacturers must treat Utah retailers differently from other retailers. This state-

imposed obligation to give preferential treatment to Utah retailers violates the

Constitution. See, e.g., United Haulers Ass’n, 550 U.S. at 338 (prohibiting

“differential treatment of in-state and out-of-state economic interests that benefits

the former and burdens the latter”) (quoting Or. Waste Sys., Inc., 511 U.S. at 99).

Contrary to the district court, the fact that manufacturers could in theory

address this clear-cut discriminatory effect by abandoning their pricing policies

nationwide does not save Section 905.1. If a state statute produces a

discriminatory effect under existing market conditions, the ability of a private party

to respond by changing its own behavior “[does] not immunize [the]



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discriminatory measure.” See W. Lynn Creamery, 512 U.S. at 194-95 (finding it

irrelevant that out-of-state companies could “remain competitive” if they

responded to a discriminatory law “by lowering their prices”). The discrimination

inquiry takes market conditions as they are, not as the regulating state wishes they

were. See also New Energy Co. of Ind. v. Limbach, 486 U.S. 269, 274 (1988)

(state statute was unconstitutional even where discriminatory effect could have

been eliminated by sister state’s actions).

2. The district court erred in finding that Section 905.1 could notbe discriminatory because it is an antitrust statute.

The district court also erred in suggesting that Section 905.1 could not be

discriminatory because it is “nothing more than a state antitrust statute, tailored to

a specific industry, which the state has the power to enact.” A-769. In particular,

the district court treated Section 905.1 as analogous to the statute upheld in Exxon

Corp. v. Governor of Maryland , 437 U.S. 117 (1978):

In Exxon, the statute required producers to provide uniform discounts to all

service stations. Here, the statute merely requires that manufacturers refrain

from mandating price fixing within the state of Utah and from discriminating

against Utah retailers for reasons related to price fixing. This Utah statute,

like the statute in Exxon, appears to be an appropriately tailored antitrust

statute within the legislative authority of the state.

A-769 – A-770. This analysis is incorrect in three ways: (1) Exxon is inapposite,

(2) dormant Commerce Clause standards are not relaxed for state antitrust laws,

and (3) Section 905.1 is not a typical antitrust statute.



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First, the district court’s reliance on Exxon is misplaced. Exxon did not

address whether the statutory provision requiring uniform discounts was consistent

with the dormant Commerce Clause. Rather, it held only that this requirement was

not preempted by the federal Robinson-Patman Act. 437 U.S. at 133-34. The

Court’s dormant Commerce Clause analysis was limited to a separate provision

that prohibited oil producers and refiners from operating retail service stations

within the Maryland. Id. at 125-29. Although the Court held that this latter

provision was not discriminatory, it did so on the ground that “in-state independent

dealers [would] have no competitive advantage over out-of-state dealers.” Id. at

126. Here, by contrast, Section 905.1 gives a clear competitive advantage to in-

state retailers over out-of-state retailers.

Second, the district court’s assumption that antitrust laws cannot violate the

Dormant Commerce Clause is misguided. The Supreme Court has never held or

remotely suggested that a State’s power to enact antitrust regulation trumps the

dormant Commerce Clause. Indeed, the case relied on by the district court,

California v. ARC America, 490 U.S. 93 (1989), is not even a dormant Commerce

Clause case. It merely held that federal law does not preempt the entire field of

antitrust law.

To be sure, states have general police power to adopt antitrust laws. But

virtually all dormant Commerce Clause cases address limitations on police



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powers—including core State powers, such as the powers to tax and to spend. See,

e.g., Wynne, 135 S. Ct. at 1799 (invalid taxation of residents’ income); W. Lynn

Creamery, 512 U.S. at 199 (tax-and-subsidy scheme invalid even though “direct

subsidization of domestic industry does not ordinarily run afoul” of the Commerce

Clause) (quotation marks omitted); C&A Carbone, 511 U.S. at 389 (regulation of

trash disposal struck down). In such cases, courts apply ordinary Commerce

Clause principles in evaluating laws that “attempt[] to remedy a significant market

issue,” A-769, and will strike them down if they are inconsistent with those

standards. See, e.g., Seelig , 294 U.S. at 522-24 (aim of protecting New Yorkers

from unfair competition did not justify direct regulation of interstate commerce);

Limbach, 486 U.S. at 274 (state’s contention that statute promoted interstate

commerce could not justify discrimination against out-of-state economic interests);

Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 352-53 (1977) (“[T]he

challenged statute cannot stand . . . even if enacted for the declared purpose of

protecting consumers from deception and fraud in the marketplace.”); Pharm.

Research & Mfrs. of Am. v. Dist. of Columbia, 406 F. Supp. 2d 56, 67-71 (D.D.C.

2005), aff’d sub nom. Biotech. Indus. Org. v. Dist. of Columbia, 496 F.3d 1362

(Fed. Cir. 2007); Globe Glass & Mirror Co. v. Brown, 917 F. Supp. 447, 452-55

(E.D. La. 1996).



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Third, even if classifying a discriminatory state law as relating to antitrust

concerns is somehow relevant to the constitutional inquiry, the district court failed

to consider the many ways in which Section 905.1 is not a typical “antitrust”

statute.6 The district court erred in suggesting that it is somehow typical for a

“state antitrust statute” to be “tailored to a specific industry.” A-769. To the

contrary, state “[a]ntitrust laws” are “not aimed at” one industry “in particular, but

rather all businesses in the marketplace.” Oneok, Inc., 135 S. Ct. at 1601

(emphasis added). The district court also failed to consider that, unlike typical

antitrust law, Section 905.1 prohibits unilateral pricing policies—policies that have

always been legal under both federal and state antitrust law, and as wholly distinct

from agreements with respect to price. See, e.g., United States v. Colgate & Co.,

250 U.S. 300, 307 (1919); PSKS, Inc. v. Leegin Creative Leather Products, Inc.,

615 F.3d 412, 419 (5th Cir. 2010); Chavez v. Whirlpool Corp., 93 Cal. App. 4th

363, 370 (Cal. Ct. App. 2001).

6 Section 905.1 also is not comparable to the state statutes cited below by 1-800

CONTACTS as addressing resale price maintenance. See A-448-49 n.22. Most of

these laws are expressly addressed to price-setting within state-created franchise

relationships, which are at not at issue here. See, e.g., Utah Code Ann. § 13-14-

201(1) (applies to motor fuel franchises); R.I. Gen Laws Ann. § 5-55-4 (same); Or.

Rev. Stat. Ann. § 650.205 (same). These laws, moreover, are addressed toquintessentially local gas pump transactions wholly unlike 1-800 CONTACTS’

nationwide Internet sales. And unlike Section 905.1, none of these measures

contains a “keep selling” mandate. See, e.g., People v. Tempur-Pedic Int’l, Inc., 95

A.D.3d 539 (N.Y. App. Div. 2012) (N.Y. Gen. Business Law § 369-a “does not

make [resale price maintenance] illegal as a matter of law,” but simply makes

certain “contract provisions” “unenforceable in the courts of this state”).



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The district court was also wrong to dismiss as “premature and speculative”

the manufacturers’ argument that, unlike traditional antitrust law, Section 905.1

requires an out-of-state manufacturer to continue selling to an in-state retailer with

whom the manufacturer wishes to cease doing business. See A-770. When the

scope of a statute is unclear, a court should not deny a pre-enforcement challenge

on the presumption that the statute will be enforced constitutionally. See Kansas

Judicial Review, 519 F.3d at 1118. That is especially true where, as here, the

language of the statute justifies the manufacturers’ concern. The statute provides,

“A contact lens manufacturer . . . may not . . . discriminate against a contact lens

retailer based on whether the contact lens retailer . . . sells or advertises contact

lenses for a particular price.” A-314. The State has never sought to explain what

this language could mean, if not that it prohibits JJVCI and other manufacturers

from ceasing shipments to a Utah retailer based on that retailer’s violation of

manufacturer pricing policies. And 1-800 CONTACTS, whose business model

this law was designed to protect, affirmatively argues that Section 905.1 requires

manufacturers to continue selling to 1-800 CONTACTS, at least so long as they

are selling to anyone in Utah.7 See, e.g., A-445—A-446.

7 The district court badly missed the mark in suggesting that Section 905.1 is not

likely to “impermissibly compel[] or [a]ffect[] interstate commerce” because a

2006 Utah statute “already expressly penalizes contact lens manufacturers that fail

to make contact lenses available to retailers in a nondiscriminatory and

commercially reasonable manner.” See A-770. The 2006 law, Utah Code § 58-



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Finally, the district court failed to apply the rule that a law that discriminates

in favor of in-state businesses can be upheld only if it satisfies strict scrutiny. See,

e.g., Hughes, 441 U.S. at 337; Or. Waste Sys., Inc., 511 U.S. at 101 (“The State’s

burden of justification is so heavy that facial discrimination by itself may be a fatal

defect.”) (quotation marks omitted); KT&G Corp., 535 F.3d at 1143. The district

court did not and could not have aptly held that Utah has a valid interest in giving

Utah retailers a commercial advantage over out-of-state entities. Nor did the

district court even begin to address whether Utah could have achieved its

ostensible aims through “nondiscriminatory alternatives.” Hughes, 441 U.S. at

337. For all of these reasons, the district court erred, and accordingly abused its

discretion, in rejecting JJVCI’s discrimination argument.

D. The District Court Overlooked the Plainly Excessive Burden That

Section 905.1 Imposes on Interstate Commerce.

Even if Section 905.1 were not a per se violation of the Dormant Commerce

Clause, it is unconstitutional under Pike v. Bruce Church, Inc., 397 U.S. 137, 142

(1970), which holds that a state statute that is not invalid per se will be struck

16a-904, prohibits discrimination among categories of retailers: “(a) prescribers;

(b) entities associated with prescribers; and (c) alternative channels of

distribution.” Moreover, the 2006 law expressly permits manufacturers to draw“commercially reasonable” distinctions between retailers. Section 905.1 goes

much further. It bans manufacturers from “discriminating” against individual

retailers who choose to sell contact lenses on terms that the manufacturers deem

harmful to their commercial interests. There is simply no equivalence between the

2006 law and Section 905.1—as evidenced by 1-800 CONTACTS’ lobbying

campaign for a new set of restrictions.



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down if it imposes “a burden on interstate commerce that is ‘clearly excessive in

relation to the putative local benefits.’” Quik Payday, Inc., 549 F.3d at 1309

(quoting Pike, 397 U.S. at 142). Burdens relevant to the Pike inquiry “include the

disruption of interstate travel and shipping due to a lack of uniformity in state laws,

impacts on commerce beyond the borders of the defendant State, and impacts that

fall more heavily on out-of-state interests.” V-1 Oil Co. v. Utah State Dep’t of

Pub. Safety, 131 F.3d 1415, 1425 (10th Cir. 1997) (alterations and internal

quotation marks omitted).

Here, the district court erroneously equated the benefits and burdens of

Section 905.1 with the benefits and burdens of antitrust law generally. In so doing,

it ignored key differences between typical antitrust law and Section 905.1, thereby

exaggerating the benefits, understating the burdens, and getting the balance wrong.

See A-771—A-772.

The only putative local benefit the district court identified was Costco’s

assertion that Section 905.1 “would return intrabrand competition to the Utah

contact lens marketplace, allowing Utah contact lens retailers to provide lower

prices to Utah consumers.” A-771. This, according to the district court, is

“exactly the type of benefit states are permitted to advance through state antitrust

laws.” Id.



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Contrary to the district court’s presumption, the legislative history of Section

905.1 demonstrates that Utah’s true aim was to protect 1-800 CONTACTS’

business model. That is indisputably not “exactly the type of benefit” antitrust law

promotes. See Geneva Pharms. Tech. Corp. v. Barr Labs, Inc., 386 F.3d 485, 507

(2d Cir. 2004) (antitrust law aims to promote competition in the market “as a

whole,” rather than to prevent harm to “individual competitors”). It is instead the

kind of parochial legislation that the dormant Commerce Clause rejects.

The district court also erred in suggesting that promoting “intrabrand”

competition is a core concern of antitrust law. It is the “promotion of interbrand

competition” that is “the primary purpose of the antitrust laws.” Leegin Creative

Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 890 (2007) (emphasis added); see

also Westman Comm’n Co. v. Hobart Int’l., Inc., 796 F.2d 1216, 1229 (10th Cir.

1986) (the antitrust “evil to be avoided is the reduction of interbrand competition

between the manufacturer’s distributors, not the reduction of intrabrand

competition”); Smith Mach. Co., Inc. v. Hesston Corp., 878 F.2d 1290, 1295 (10th

Cir. 1989) (similar). That, in turn, is why the Supreme Court held that minimum

resale price maintenance can be good for competition even though it tends to

“reduc[e] intrabrand competition.” Leegin, 551 U.S. at 890. The practice “can

stimulate interbrand competition—the competition among manufacturers selling

different brands of the same type of product.” Id.

Appellate Case: 15-4073 Document: 01019451233 Date Filed: 06/26/20

johnson & johnson appeal to 10th circuit

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