Seventeen States and NAW Challenge California’s Packaging EPR Law

Key Takeaways

• A coalition of 17 states and the National Association of Wholesaler-Distributors (NAW) filed a federal lawsuit challenging California’s Plastic Pollution Prevention and Packaging Producer Responsibility Act, commonly known as SB 54.
• The lawsuit targets several structural features of California’s extended producer responsibility (EPR) program, including mandatory participation in a Producer Responsibility Organization (PRO), fee-setting by a private PRO, mandatory plastic source-reduction and recycling-rate requirements, restrictions on how producers may communicate certain costs to customers, and the alleged interstate reach of California’s regime.
• Plaintiffs assert claims under the Commerce Clause, the Import-Export Clause, the First Amendment, federal due process principles, the California Constitution’s free-speech clause, and federal and state restrictions on delegations to private entities.
• The case could have implications beyond California. Other packaging EPR laws also rely on PRO-based implementation, and plaintiffs have already brought related challenges in Oregon and Colorado. In the Oregon case, the court issued a preliminary injunction—though it limited it to NAW and its members.
• Environmental groups have also challenged California’s implementing regulations, arguing they improperly weaken the program; this creates more uncertainty for those seeking to comply with the new requirements.
• Businesses subject to packaging EPR obligations should monitor this litigation closely, as it may influence program implementation and compliance planning in California and other states with packaging EPR laws, including Colorado, Maine, Maryland, Minnesota, Oregon, and Washington.
• The lawsuit does not, in itself, suspend SB 54 compliance obligations. Unless and until a court orders otherwise, California’s SB 54 regulations remain in effect, and producer registration, reporting obligations, and the Circular Action Alliance’s implementation process continue.

California’s Packaging EPR Law

California’s SB 54 is one of the country’s most consequential packaging EPR laws. It applies to “covered material,” a statutory category that includes single-use packaging and plastic single-use food service ware, and it places substantial responsibility on “producers” of those materials.

The law generally requires producers–often brand owners–to participate in an approved PRO and provides the PRO a great deal of authority to develop and implement the program. CalRecycle has approved Circular Action Alliance (CAA) as California’s sole PRO. SB 54 also establishes aggressive program targets. By 2032, covered material offered for sale, distributed, or imported into California must be recyclable (defined to include reuse) in California or eligible to be labeled compostable. The law further imposes source-reduction and recycling-rate requirements for plastic-covered material. Beginning in 2027, the statute also requires payment of an annual $500 million environmental mitigation surcharge, which the PRO in turn allocates among participating producers.

The NAW Complaint

The complaint, filed on June 22, 2026, by 17 states and NAW, seeks declaratory and injunctive relief and attacks SB 54 on multiple constitutional and structural grounds.

Commerce Clause Claims

Plaintiffs allege that SB 54 discriminates against and unduly burdens interstate commerce. One theory focuses on the allocation of producer responsibility. According to the complaint, when a manufacturer has a presence in California, that manufacturer is treated as the producer; when the manufacturer lacks a California presence, the retailer may instead be treated as the producer and bear corresponding compliance obligations and fees. Plaintiffs argue that this structure creates economic incentives for California retailers to favor products made by companies with an in-state presence.

Plaintiffs also challenge the recycling-rate provisions. They allege that plastic waste exported for recycling outside California is subject to certification and documentation requirements for the recycling technology used, while comparable burdens do not apply to California-based recyclers in the same way. In addition, plaintiffs contend that the environmental mitigation surcharge and individual assessments function like taxes and fail federal requirements governing state taxation of interstate commerce, including substantial nexus, fair apportionment, nondiscrimination, and fair relation to state-provided services. 

First Amendment Claims 

SB 54 provides that PRO fees “shall not be passed on to consumers as a separate item on a receipt or invoice.” Plaintiffs argue that this restriction violates the First Amendment and the California Constitution’s free speech protections because it bars regulated businesses from identifying SB 54-related costs through a separate line item. They contend that the restriction suppresses speech and interferes with public debate about the law. 

Plaintiffs also assert compelled-speech and compelled-association theories. In their view, SB 54 effectively requires regulated businesses to join and fund CAA, while CAA itself engages in messaging and policy advocacy concerning EPR programs.

Delegation and Due Process Claims

Plaintiffs allege that SB 54 gives CAA broad authority to design and implement the producer responsibility plan, develop fee methodologies, impose fee adjustments, and shape the practical burdens of compliance. They contend that this structure violates federal due process principles limiting delegations of regulatory authority to private actors, as well as California’s nondelegation doctrine.

Extraterritoriality and Import-Export Clause Claims

The complaint alleges that SB 54 regulates beyond California’s borders by affecting packaging design, product distribution, recycling decisions, and waste-management practices outside the state. Plaintiffs frame the argument as a due process and federalism concern involving the constitutional limits on a state’s authority to impose its policy choices on interstate commerce. 

In addition, plaintiffs assert an Import-Export Clause claim, arguing that the Court should read the Clause more broadly than current Supreme Court precedent to constrain taxes on both interstate and foreign imports.

Implications for Businesses

The California lawsuit follows NAW’s earlier challenge to Oregon’s packaging EPR program. Although the statutory schemes differ, both cases raise questions about the constitutional implications of assigning substantial implementation authority to a single PRO. In Oregon, the district court issued a preliminary injunction barring enforcement of the law against NAW and its members while the litigation proceeds. See B&D’s discussion of the Oregon challenge in a previous alert.

A separate challenge is also pending in Colorado, where the Independent Lubricant Manufacturers Association has sued over aspects of the implementation of that state’s packaging EPR program. 

Environmental groups have also brought a separate challenge to the California program in state court, claiming that CalRecycle’s implementing regulations improperly weaken the program in multiple respects. 

For regulated businesses, the litigation over California’s program creates uncertainty, but not a compliance pause. Companies subject to SB 54 should continue to track applicable requirements, CAA data requests, CalRecycle guidance, reporting obligations, and implementation milestones, unless a court enters relief altering those obligations. 

Businesses with packaging EPR obligations in California and other states should also consider how this litigation may affect longer-term compliance planning, producer registration strategies, cost allocation, and communications regarding program-related charges. 

Beveridge & Diamond’s ESG, Sustainability and Product Stewardship, Global Supply Chains practice groups have extensive experience counseling individual companies and industry coalitions on EPR mandates. With an office in San Francisco, B&D’s experience includes coordination with CalRecycle on the drafting and implementation of EPR program regulations, on behalf of potentially impacted clients. In addition, our Consumer Products industry group supports U.S. and multinational companies involved in the manufacture, distribution, transportation, or sale of consumer goods in a competitive and rapidly evolving market. We help clients navigate complex regulatory requirements throughout the product lifecycle. Visit our EPR hot topics page for additional resources or contact the authors.