Alcon Laboratories, Bausch & Lomb appeal to 10th Circuit Court

8/20/2019 Alcon Laboratories, Bausch & Lomb appeal to 10th Circuit Court

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Nos. 15-4072, 15-4073

IN THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

JOHNSON & JOHNSON VISION CARE, I NC., ALCON LABORATORIES, I NC., ANDBAUSCH & LOMB I NCORPORATED,

Plaintiffs–Appellants,

v.

SEAN D. R EYES, ATTORNEY GENERAL OF UTAH, IN HIS OFFICIAL CAPACITY, Defendant–Appellee.

and

1-800 CONTACTS, I NC. AND COSTCO WHOLESALE CORPORATION, Intervenor Plaintiffs–Appellees,

O N APPEAL FROM AN ORDER OF THE U NITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, THE HONORABLE DEE BENSON

CONSOLIDATED CIVIL NO. 2:15-CV-00252-DB

ORAL ARGUMENT SCHEDULED FOR AUGUST 27, 2015

BRIEF OF APPELLANTS ALCON LABORATORIES, INC., AND BAUSCH

& LOMB INCORPORATED

Amy F. SorensonAmber M. MettlerS NELL & WILMER LLP

Gateway Tower West15 West South Temple, Suite 1200Salt Lake City, Utah 84101-1547(801) 257-1900

David R. MarriottDavid GreenwaldCRAVATH, SWAINE & MOORE LLP

Worldwide Plaza825 Eighth Avenue New York, New York 10019(212) 474-1000

Attorneys for Appellant Alcon Laboratories, Inc.

Appellate Case: 15-4073 Document: 01019451242 Date Filed: 06/26/2015 Page: 1


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Erik A. ChristiansenPARSONS BEHLE & LATIMER One Utah Center

201 South Main Street, Suite 1800P.O. Box 45898Salt Lake City, Utah 84145(801) 532-1234

Clifford M. SloanSteven C. SunshineMaria Raptis

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP

1440 New York Avenue NWWashington, DC 20005(202) 371-7000

Attorneys for Appellant Bausch & Lomb Incorporated

June 26, 2015



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RULE 26.1 CORPORATE DISCLOSURE STATEMENT

Pursuant to Federal Rule of Appellate Procedure 26.1, Plaintiffs-

Appellants Alcon Laboratories, Inc., and Bausch & Lomb Incorporated make the

following disclosures:

Alcon Laboratories, Inc., is an indirect wholly-owned subsidiary of

Novartis AG, a publicly traded company.

Bausch & Lomb Incorporated is a wholly owned subsidiary of Bausch

& Lomb Holdings Incorporated. Bausch & Lomb Holdings Incorporated is

indirectly but wholly owned by its parent, Valeant Pharmaceuticals International,

Inc., a publicly traded corporation. Valeant Pharmaceuticals International, Inc. has

no parent corporation, and no publicly traded company owns more than 10 percent

of its stock.



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TABLE OF CONTENTS

Page

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

CERTIFICATION PURSUANT TO TENTH CIRCUIT RULE 31.3(A) ............. vii

GLOSSARY ........................................................................................................... viii

STATEMENT OF RELATED CASES .................................................................... ix

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

STATEMENT OF THE ISSUES............................................................................... 2

INTRODUCTION ..................................................................................................... 4

STATEMENT OF FACTS ........................................................................................ 8

A. Contact Lenses Within the United States. ............................................. 8

B. Contact Lens Manufacturers. ................................................................ 9

C. The Utah Statute. ................................................................................. 13

D. Course of Proceedings. ........................................................................ 16

E. The District Court’s Ruling. ................................................................ 17

SUMMARY OF THE ARGUMENT ...................................................................... 21

STANDARD OF REVIEW ..................................................................................... 26

ARGUMENT ........................................................................................................... 26

I. ALCON AND B+L ARE LIKELY TO SUCCEED ON THEMERITS. ........................................................................................................ 26

A. The Utah Law Directly Regulates Interstate Commerce and HasImpermissible Extraterritorial Effects. ................................................ 27



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B. The Utah Law Impermissibly Discriminates Against InterstateCommerce. .......................................................................................... 33

1. The Utah law discriminates facially and in its effects. ............. 34

2.

The discriminatory Utah law cannot survive strictscrutiny. ..................................................................................... 39

3. The manufacturers’ pre-enforcement challenge was proper. ....................................................................................... 43

C. The Utah Law Imposes Excessive Burdens on InterstateCommerce. .......................................................................................... 45

II. ALCON AND B+L WILL SUFFER IRREPARABLE INJURY

ABSENT AN INJUNCTION. ....................................................................... 49

III. THE THREATENED INJURY TO ALCON AND B+LOUTWEIGHS ANY PUBLIC HARM THE INJUNCTION WOULDCAUSE, AND THE PUBLIC INTEREST WOULD NOT BEADVERSELY AFFECTED. ......................................................................... 53

CONCLUSION ........................................................................................................ 56



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TABLE OF AUTHORITIES

Page(s)

Cases

ACLU v. Johnson,194 F. 3d 1149 (10th Cir. 1999) ............................................................. 45, 49, 50

ANR Pipeline Co. v. Corp. Comm’n of State of Okla.,860 F.2d 1571 (10th Cir. 1988) .......................................................................... 50

Awad v. Ziriax,670 F.3d 1111 (10th Cir. 2012) .................................................................... 26, 53

Baldwin v. G.A.F. Seelig, Inc.,

294 U.S. 511 (1935) .............................................................................................. 5

Blue Circle Cement, Inc. v. Bd. of Cnty. Comm’rs,27 F.3d 1499 (10th Cir. 1994) ............................................................................ 46

Brooke Group Ltd. v. Brown & Williamson Tobacco Corp.,509 U.S. 209 (1993) ............................................................................................ 48

Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth.,476 U.S. 573 (1986) ............................................................................ 7, 27, 28, 30

Burwell v. Hobby Lobby Stores, Inc.,134 S. Ct. 2751 (2014) ........................................................................................ 53

C & A Carbone, Inc. v. Clarkstown,511 U.S. 383 (1994) ...................................................................................... 33, 39

California v. ARC America Corp.,490 U.S. 93 (1989) .............................................................................................. 41

Citizens United v. Gessler ,

773 F.3d 200 (10th Cir. 2014) ............................................................................ 53

Dennis v. Higgins,498 U.S. 439 (1991) ............................................................................................ 54

Drakes Bay Oyster Co. v. Jewell ,747 F.3d 1073 (9th Cir. 2013) ............................................................................ 53



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Edgar v. MITE Corp.,457 U.S. 624 (1982) ........................................................................................ 4, 28

Evans v. Utah,21 F. Supp. 3d 1192 (D. Utah 2014)................................................................... 53

Exxon Corp. v. Governor of Maryland ,437 U.S. 117 (1978) ...................................................................................... 41, 42

Gonzales v. Carhart ,550 U.S. 124 (2007) ...................................................................................... 45, 49

Grand River Enters. Six Nations, Ltd. v. Pryor ,425 F.3d 158 (2d Cir. 2005) ............................................................................... 28

Granholm v. Heald ,544 U.S. 460 (2005) ............................................................................................ 33

Healy v. Beer Inst.,491 U.S. 324 (1989) ..................................................................................... passim

Heideman v. S. Salt Lake City,348 F.3d 1182 (10th Cir. 2003) .......................................................................... 26

Hobby Lobby Stores, Inc. v. Sebelius,723 F.3d 1114 (10th Cir. 2013) .......................................................................... 53

Holder v. Humanitarian Law Project ,561 U.S. 1 (2010) .......................................................................................... 45, 49

Hughes v. Okla.,441 U.S. 322 (1979) ............................................................................................ 48

Hunt v. Wash. State Apple Adver. Comm’n,432 U.S. 333 (1977) ...................................................................................... 37, 38

K-S Pharms., Inc. v. Am. Home Prods. Corp.,962 F.2d 728 (7th Cir. 1992) .............................................................................. 30

Kan. Judicial Review v. Stout ,519 F.3d 1107 (10th Cir. 2008) .................................................................... 45, 49



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Kleinsmith v. Shurtleff ,571 F.3d 1039 (10th Cir. 2009) .................................................................... 33, 39

Knevelbaard Dairies v. Kraft Foods, Inc.,232 F.3d 979 (9th Cir. 2000) .............................................................................. 40

KT & G Corp. v. Attorney Gen. of Okla.,535 F.3d 1114 (10th Cir. 2008) .......................................................................... 28

Minard Run Oil Co. v. U.S. Forest Serv.,670 F.3d 236 (3d Cir. 2011) ............................................................................... 53

Nevares v. M.L.S.,345 P.3d 719 (Utah 2015) ................................................................................... 27

Nken v. Holder ,556 U.S. 418 (2009) ...................................................................................... 20, 53

Or. Waste Sys., Inc. v. Dep’t of Envt’l Quality of Or.,511 U.S. 93-94 (1994) ...................................................................... 23, 34, 39, 40

Pike v. Bruce Church, Inc.,397 U.S. 137 (1970) ............................................................................................ 46

Quik Payday, Inc. v. Stork ,549 F.3d 1302 (10th Cir. 2008) .......................................................................... 26

Steffel v. Thompson,415 U.S. 452 (1974) ............................................................................................ 50

Toomer v. Witsell ,334 U.S. 385 (1948) ............................................................................................ 51

Wyo. v. Okla.,502 U.S. 437 (1992) ............................................................................................ 33

Younger v. Harris,401 U.S. 37 (1971) ........................................................................................ 45, 50

Statutes & Rules

15 U.S.C. § 7601(a) ................................................................................................... 9

28 U.S.C. § 1292(a)(1) ............................................................................................... 1



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28 U.S.C. § 1331 ........................................................................................................ 1

28 U.S.C. § 2201 ........................................................................................................ 1

28 U.S.C. § 2202 ........................................................................................................ 1

42 U.S.C. § 1983 ........................................................................................................ 1

Utah Code § 58-16a-904 .......................................................................................... 38

Utah Code § 58-16a-905 .......................................................................................... 39

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

Utah Code § 58-16a-906 .......................................................................................... 14

Other Authorities

U.S. Const. Art I § 8 cl. 3 ..................................................................................... 2, 26



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CERTIFICATION PURSUANT TO TENTH CIRCUIT RULE 31.3(A)

Pursuant to Tenth Circuit Rule 31.3(A), Plaintiffs-Appellants Alcon

Laboratories, Inc., and Bausch & Lomb Incorporated state that filing a joint brief

separate from Johnson & Johnson Vision Care, Inc. was necessary to permit full

and fair explanation of the impact of the Utah law on their businesses and in light

of the shortness of time for collaboration. While Alcon and Bausch & Lomb are

submitting a joint brief, any statements made about an individual company’s

practices and policies (e.g., unilateral pricing policies) are made on behalf of that

company alone.

Amy F. SorensonAmber M. MettlerS NELL & WILMER LLPGateway Tower West15 West South Temple, Suite 1200Salt Lake City, Utah 84101-1547

(801) 257-1900

David R. MarriottDavid GreenwaldCRAVATH, SWAINE & MOORE LLPWorldwide Plaza825 Eighth Avenue

New York, New York 10019

(212) 474-1000

Attorneys for Appellant Alcon Laboratories, Inc.

Erik A. ChristiansenPARSONS BEHLE & LATIMER One Utah Center201 South Main Street, Suite 1800P.O. Box 45898

Salt Lake City, Utah 84145(801) 532-1234

Clifford M. SloanSteven C. SunshineMaria RaptisSKADDEN, ARPS, SLATE, MEAGHER &

FLOM LLP

1440 New York Avenue NWWashington, DC 20005(202) 371-7000

Attorneys for Appellant Bausch & Lomb Incorporated



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GLOSSARY

AG Attorney General of the State of Utah

B+L Bausch & Lomb Incorporated

ECP Eye Care Professional

FDA Food and Drug Administration

JJVCI Johnson & Johnson Vision Care, Inc.

UPP Unilateral Retail Pricing Policy



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STATEMENT OF RELATED CASES

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

appeal captioned Johnson & Johnson Vision Care v. Reyes, No. 15-4071, which

was initiated on the same day as this appeal (May 12, 2015).



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JURISDICTIONAL STATEMENT

The United States District Court for the District of Utah has subject-

matter jurisdiction over this action under 28 U.S.C. § 1331 because the action

arises under 42 U.S.C. § 1983 and the United States Constitution. Pursuant to

28 U.S.C. §§ 2201-2202, the district court may issue a declaratory judgment and

further necessary or proper relief.

This Court has jurisdiction over this appeal pursuant to 28 U.S.C.

§ 1292(a)(1) because the appeal is taken from an interlocutory order of the United

States District Court for the District of Utah denying Alcon and Bausch & Lomb’s

request for injunctive relief.

On May 11, 2015, the United States District Court for the District of

Utah entered a decision denying Alcon’s Motion for a Preliminary Injunction and

Bausch & Lomb’s Motion for a Preliminary Injunction. Alcon and Bausch &

Lomb timely moved to appeal that decision on May 12, 2015.



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STATEMENT OF THE ISSUES

1. Whether a state law “directly regulates” interstate commerce or has

impermissible “extraterritorial effects,” in violation of the Commerce Clause of the

United States Constitution (the “Commerce Clause”), U.S. Const. Art I § 8 cl. 3,

where (a) the law confers benefits on online retailers based in Utah for their sales

to consumers in all 50 states; (b) the law regulates the prices at which out-of-state

manufacturers’ products are sold in all 50 states; (c) the law, under the threat of

civil penalties for non-compliance, compels manufacturers, all of whom are

located outside the state, to engage in commerce with in-state retailers; (d) all of

the companies subject to regulation and enforcement are outside the state; and

(e) all of the conduct the law regulates takes place outside the state.

2. Whether a state law regulating the commercial conduct of

manufacturers and distributors impermissibly discriminates against interstate

commerce, in violation of the Commerce Clause, where it (a) exempts in-state

retailers, but not out-of-state retailers, from any manufacturer policy affecting

retail prices; and (b) requires manufacturers to extend to all in-state retailers, but

not to out-of-state retailers, the benefits of programs that are normally reserved for

licensed eye care professionals.

3. Whether a state law imposes “excessive burdens” on interstate

commerce, in violation of the Commerce Clause, where (a) the vast majority of the



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consumers purportedly benefited by the law are consumers who reside outside the

enacting state; (b) every company subject to penalty under the law is located

outside the state; and (c) the law puts every out-of-state retailer nationwide at a

disadvantage in competing against in-state retailers.

4. Whether the parties seeking a preliminary injunction of enforcement

of an allegedly unconstitutional law before it goes into effect have shown that they

will suffer irreparable harm where, in the absence of a preliminary injunction, the

parties will suffer (a) a violation of their constitutional rights; (b) monetary loss

that cannot be recovered from the entity causing the loss owing to that entity’s

sovereign immunity; and (c) intangible commercial losses, such as lost incentives

to innovate and loss of good will.

5. Whether the balance of the equities and public interest factors favor

the entry of a preliminary injunction where (a) an injunction is required to prevent

the violation of a party’s constitutional rights; (b) an injunction would preserve the

national interest in preventing state regulation of interstate commerce; and (c) the

requested injunction merely preserves the status quo until the case can be resolved

on the merits.



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INTRODUCTION

This appeal concerns the State of Utah’s effort to regulate interstate

commerce for the benefit of a favored in-state company.

The law at issue, Utah Code Section 58-16a-905.1, is an extraordinary

intrusion into interstate commerce, in clear violation of settled principles of

Commerce Clause jurisprudence. The law confers special benefits on Utah-based

retailers—including 1-800 Contacts, the largest contact lens retailer in the nation—

for their sales in all 50 states. The law also purports to regulate contact lens

manufacturers and distributors nationwide. Its purpose and effect are to insulate

Utah retailers, but not non-Utah retailers, from a broad array of contact lens

manufacturer policies, some of them in effect for years, that certain retailers would

prefer to see disappear. The primary beneficiary of this law is its chief lobbyist,

1-800 Contacts. 1-800 Contacts, which has intervened in this action, contends

(correctly) that the law will entitle it to preferred treatment over non-Utah retailers

in all 50 states, not just Utah, and both the State and the district court have

explicitly declined to disagree with that interpretation.

It is well-established that a state may not “directly regulate” interstate

commerce or enact laws that have impermissible extraterritorial effects. See, e.g.,

Edgar v. MITE Corp., 457 U.S. 624, 640 (1982). But the Utah law not only

regulates interstate commerce; it compels it by subjecting out-of-state



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manufacturers to the threat of civil penalties if, pursuant to the announced terms of

a manufacturer program applied to retailers in all 50 states, they decline to ship

contact lenses to Utah discounters, or if, pursuant to the same program, they

decline to permit Utah discounters to participate in programs that are normally

reserved for licensed ECPs. At the same time, the Utah law regulates the prices at

which contact lenses are sold (by Utah contact lens retailers) in all 50 states. The

Supreme Court has held that a state “has no power to project its legislation into

[another State] by regulating the price to be paid in that state for [goods] acquired

there.” Baldwin v. G.A.F. Seelig, Inc., 294 U.S. 511, 521 (1935). That is exactly

what the law here does, and that effect is not speculative either. By its terms, the

law prevents manufacturers from taking actions that have “the effect of fixing or

otherwise controlling the price that a contact lens retailer charges or advertises for

contact lenses.” As construed by the State, the law does not distinguish between

prices that retailers charge or advertise to consumers inside Utah or outside Utah.

And when asked at oral argument whether the AG in fact interpreted the statute to

apply to transactions outside Utah, he responded, “perhaps.” See A-847

(OA Tr. 63:25). At the same time, manufacturers that violate the sweeping new

legislation in their dealings with Utah-based retailers are subject to severe civil

penalties.



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It makes no difference if the Utah law has any resemblance to

traditional state antitrust legislation. State antitrust statutes, like state statutes of

any other kind, must comply with the Commerce Clause, which means that they

must not favor in-state economic actors and they must not regulate primarily

interstate commerce. Unlike state antitrust laws of general application, the Utah

law applies to only one industry (contact lenses) and protects only in-state retailers,

and not out-of-state retailers, from manufacturer policies, and it gives benefits to

in-state retailers that are not extended to out-of-state retailers. Unlike ordinary

state antitrust laws, the Utah law compels out-of-state companies to do business

with in-state actors. Unlike ordinary state antitrust laws, the Utah law applies

predominantly to interstate transactions involving consumers who reside outside

Utah. And unlike state antitrust laws of general application, the legislative history

of the Utah law shows that it was enacted for the clear purpose of giving an

advantage in a predominantly national, interstate market to one in-state firm. It is

those aspects of the Utah law, which distinguish the Utah law from other state

antitrust statutes, that trigger its violation of the Commerce Clause.

The law is unconstitutional for another reason: it impermissibly

discriminates against out-of-state economic interests. The first part of the law, as

construed in the brief the AG submitted to the district court, insulates Utah

retailers, but not non-Utah retailers, from any manufacturer action or policy that



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affects the retail price of its contact lenses. It does so by subjecting out-of-state

manufacturers to the threat of civil penalties if they choose not to supply their

contact lenses to retailers in Utah who decline to abide by manufacturer pricing

policies that, in the AG’s view, have “the effect of fixing or otherwise controlling

the price that a contact lens retailer charges or advertises for contact lenses.” The

second part of the law entitles Utah contact lens retailers that do not prescribe

contact lenses, such as low-cost discounters and internet sellers, to participate on

equal terms in any program that contact lens manufacturers have established over

the years for licensed ECPs. It does so by subjecting out-of-state manufacturers to

the threat of civil penalties unless they extend to Utah discounters (e.g., 1-800

Contacts) the benefits of any program designed for ECPs, nationwide, on the

theory that the manufacturer has “discriminated against” Utah discounters.

The Commerce Clause does not permit this kind of favoritism. The

Supreme Court has affirmed repeatedly that a state may not “favor in-state

economic interests over out-of-state interests.” Brown-Forman Distillers Corp. v.

N.Y. State Liquor Auth., 476 U.S. 573, 579 (1986). But that is precisely what the

Utah law does: it exempts Utah retailers, but not non-Utah retailers, from

manufacturers’ price policies; and it entitles Utah discounters, but not non-Utah

discounters, to benefits normally extended only to licensed ECPs. The practical

effect of the Utah law—which was reaffirmed before the district court by both the



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AG and 1-800 Contacts itself—is that 1-800 Contacts will be able to sell at a lower

price, nationwide, than all of its out-of-state competitors. This predicted effect is

not speculative; it is a necessary result of the text of the law, as narrowed by the

AG in its brief before the district court.

STATEMENT OF FACTS

A. Contact Lenses Within the United States.

Contact lenses are worn by over 37 million adult U.S. residents, and

their sales within the U.S. amount to approximately $4 billion annually. (A-236,

238 (Declaration of Richard E. Weisbarth, OD (April 13, 2015) (“Weisbarth

Decl.”) ¶¶ 3, 11).) Contact lenses comprise a highly differentiated group of

products. They vary according to the eye condition they are intended to address

(e.g., near-sightedness, far-sightedness, astigmatism, presbyopia), the conditions

under which they are expected to be worn (e.g., during the day only or overnight),

the duration of use (daily, bi-weekly, or monthly), and their relative comfort. ( Id.

¶ 4 (A-236).) The many varieties of contact lenses give rise to a large number of

competing offerings, with over 370 different types of soft contact lenses available

within the U.S. ( Id. ¶ 6 (A-236).)

Contact lenses are FDA-regulated medical devices and may be sold

only with a valid prescription from a licensed ECP, such as an ophthalmologist or

an optometrist. ( Id. ¶ 7 (A-237).) Once they are prescribed, however, contact



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lenses may be purchased either from the prescribing ECP or from an eye care

retailer (e.g., LensCrafters), a mass merchandise retailer (e.g., Costco, Wal-Mart),

an internet retailer (e.g., 1-800 Contacts, Lens.com), a pharmacy, or any other

person who sells the prescribed lenses. ( Id. ¶ 8 (A-237).) Under federal law,

patients are entitled to receive their prescriptions from their ECPs to enable them to

fill and refill the prescription either from their prescribing ECP or from their

retailer of choice. ( Id. (citing 15 U.S.C. § 7601(a)).)

Over the past several years, sales of contact lenses through channels

other than ECPs have increased, reflecting general trends in e-commerce and the

rise of internet retailers, like 1-800 Contacts, dedicated to eye care products.

(Weisbarth Decl. ¶ 9 (A-237).) Internet retailers typically do not employ ECPs

who interact directly with consumers, and their customer service staff typically is

not qualified to assess or re-assess their customers’ vision correction needs, to

prescribe lenses, or to monitor ocular health. ( Id. ¶ 10 (A-238).)

B. Contact Lens Manufacturers.

In the U.S., there are currently four major contact lens manufacturers:

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

(“JJVCI”), Bausch & Lomb Incorporated (“B&L”), and CooperVision Inc.

(“CooperVision”). ( Id. ¶ 12 (A-238).) None of the four manufacturers has a

facility within Utah. For example, Alcon is based in Fort Worth, Texas, and all



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Alcon contact lenses shipped in the U.S. originate from Alcon’s facility in Johns

Creek, Georgia. ( Id. ¶¶ 13-16 (A-238).) B+L has its principal place of business in

Bridgewater, New Jersey and no significant operations in Utah. (A-261

(Complaint for Declaratory and Injunctive Relief, Bausch & Lomb, Incorporated v.

Reyes, No. 2:15-cv-00259 (D. Utah Apr. 14, 2015) (“Bausch & Lomb Compl.”) ¶

6).)

In introducing new products, a contact lens manufacturer faces the

challenges of educating ECPs about the attributes of its products and of

encouraging them, in turn, to inform patients of the product’s potential benefits.

(A-236, 240-41, 242-43 (Weisbarth Decl. ¶¶ 5, 23, 33).) This is a familiar

challenge for developers of innovative products. But it is exacerbated in the

contact lens industry because of the prevalence of lower-cost retailers, who

effectively “free-ride” on the efforts of ECPs to learn about a manufacturer’s

offerings and to educate consumers about their benefits whenever they fill or refill

the prescriptions the ECPs write. ( Id. ¶ 33 (A-242-43).) ECPs may be reluctant to

undertake those efforts if, once a patient receives a prescription, it may be filled by

a low-cost contact lens reseller whose business model does not include those

investments and who “free-rides” on the professional services ECPs provide.

To overcome these challenges, to improve patient access to better

information and new technologies, and to enhance access to better eye care, a



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manufacturer may invest heavily in programs that benefit consumers, ECPs, and

the market for vision care products. ( Id . ¶ 23 (A-240-41).) For example, over the

years, Alcon’s programs have included the following:

• “Fit” rebates, consisting of enhanced rebates offered by an ECP whofits a patient for contact lenses when the patient’s prescription is filled

by the prescribing ECP;

• Rebates offered by an ECP to a patient who adopts new contact lensesif the patient’s prescription is filled by the prescribing ECP;

• Making free trial lenses available only to ECPs, and contact lens

retailers who are associated with an ECP, who fit patients with contactlenses;

• Launching new contact lens products gradually on a region-by-region basis and making them initially available only from ECPs or retailerswho are associated with an ECP;

• Discontinuing supplies to retailers who engage in “gray market” salesactivities.1

( Id.) These programs are operated on a nationwide basis and often are tailored to

the needs of specific ECPs and contact lens retailers. ( Id. ¶ 24 (A-241).) Most of

the benefits of these programs are extended only to ECPs and retailers associated

with ECPs who prescribe contact lenses, and not to retailers such as internet

1 For contact lenses, “gray market” sales refer to sales of contact lenses that are

not authorized by the manufacturer, often by entities that are not licensed to sellcontact lenses (e.g., sales on internet auction sites, at flea markets, in conveniencestores, and in beauty supply stores). Gray market sales of contact lenses areassociated with a heightened risk to consumer health and safety because they allowcontact lenses to be obtained without a current valid (unexpired) prescription andwithout the supervision of a licensed ECP. ( Id. ¶ 8 (A-237).)



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resellers who dispense or resupply contact lenses but do not prescribe them. ( Id.

¶ 25 (A-241).) Only some, not all, of the programs affect retail pricing.

Over the past two years, contact lens manufacturers also have adopted

“Unilateral Pricing Policies” or “UPPs.” ( Id. ¶ 31-32 (A-242).) For example,

Alcon adopted a UPP in connection with the launch of four new premium products

beginning in June 2013. ( Id. ¶¶ 31, 36-37 (A-242-44 ).) Under Alcon’s UPP, a

contact lens retailer is free to sell the covered product at any price. ( Id. ¶ 34 (A-

243).) But if the retailer sells the product below a specified floor, and persists in

doing so after notice from Alcon, Alcon will decline to supply the seller with the

product in question for one year. ( Id.) Alcon will continue to supply the seller

with other Alcon products and will not take any action against the seller other than

to discontinue supply. ( Id.)2 The policy was announced through a public

statement by Alcon. ( Id. ¶ 35 (A-243).) Alcon sought no agreement, formal or

informal, from any person to abide by the UPP. ( Id.) Alcon acted independently

in adopting its UPP.

Similarly, in 2014, B+L adopted a UPP for two innovative contact

lens products that it spent years developing. (A-263, 265 (Bausch & Lomb Compl.

2 Thus, contrary to the statement in the district court’s opinion, Alcon’s UPPdoes not “punish[] the retailer by terminating supply of contact lenses for oneyear.” (A-762.) Nor does B+L’s UPP have that effect.



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¶¶ 13-16, 21).) The policy provides that B+L will not supply those lenses to

customers who sell or advertise the lenses for less than a specified price. ( Id. ¶ 21

(A-265).) The UPP is carefully circumscribed (it applies only to two specific lines

of new and innovative products) and unilateral. ( Id. ¶ 22 (A-265).) It also makes

clear that resellers are free to set their own resale prices, while B+L will exercise

its own discretion about its potential commercial partners in a structured fashion.

( Id.)

C.

The Utah Statute.

On March 10, 2015, the Utah Legislature amended its Contact Lens

Consumer Protection Act through the addition of Section 58-16a-905.1. That

section reads as follows:

58-16a-905.1. Contact lens manufacturer or distributor – Prohibitedconduct.

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 pricethat a contact lens retailer charges or advertises for contactlenses; or

(2) discriminate against a contact lens retailer based on whetherthe 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 contactlenses; or



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

At the same time, the Legislature added a provision to Section 58-16a-906

(Penalties for Violations) stating that “[t]he 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.”

The Utah law was championed in the Utah legislature by 1-800

Contacts, an intervenor in this case, a Utah company, and the largest contact lens

retailer in the United States. Indeed, the senator who sponsored the bill yielded the

majority of each of her opening statements in the House and Senate Committees to

a vice president of 1-800 Contacts, and she yielded additional portions of her

presentation in the House Committee to 1-800 Contacts’s outside counsel—the

same counsel that is representing 1-800 Contacts in this action. (A-122-44

(Transcription of March 5, 2015, House Business and Labor Standing Committee,

Floor Debates for Utah Senate Bill SB0169 at 5-27); A-185-89 (Transcription of

February 17, 2015, Senate Business and Labor Standing Committee, Floor Debates

for Utah Senate Bill SB0169 at 4-8).) In the House Committee, the 1-800 Contacts

representative stressed that his company is the “largest retail seller of contact

lenses in the world” and touted the company’s Utah residence:

“We employ about a thousand people here in the state of Utah,which is our headquarters, and we pay – last year we paid alittle over $30,000,000.00 in payroll. We are a proud Utah born



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and raised company and we are happy to be in – . And we have been a proud partner with the state.” (A-124 (Transcription ofMarch 5, 2015, House Business and Labor StandingCommittee, Floor Debates for Utah Senate Bill SB0169 at 7).)

A member of the Utah House candidly acknowledged that the Utah law was “in the

halls and up on the Capitol . . . dubbed kind of the 1-800 bill.” (A-93

(Transcription of March 10, 2015, House Floor Debates Day 43, Floor Debates for

Utah Senate Bill SB0169) at 15.)

Although the apparent impetus for the Utah law was the adoption of

UPPs by contact lens manufacturers, the law sweeps much more broadly. By its

terms, subsection (1) also reaches maximum resale price maintenance, the setting

of price ceilings by manufacturers, and maximum advertised price policies. And

subsection (2), the retailer anti-discrimination provision, reads like a wish-list for a

low-cost contact lens retailer (like 1-800 Contacts) who does not employ ECPs or

undertake the costs and liabilities associated with lens prescription. Under

subsection (2), any practice that favors an ECP over such a retailer is subject to

penalty, since it operates to “discriminate” against a retailer based on whether it is,

at minimum, “authorized by law to prescribe contact lenses.” Those practices

include some of the very ones described above: the offer of “fit rebates”; the offer

to ECPs of free trial lenses; product launches through ECP-affiliated retailers only;

and actions undertaken to prevent gray market sales by unauthorized resellers, who



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often sell lenses without valid refill prescriptions. (A-240-41 (Weisbarth Decl.

¶ 23).)

D. Course of Proceedings.

Alcon initiated this litigation, and filed a motion for a preliminary

injunction, on April 13, 2015. On April 14, 2015, JJVCI and B+L filed separate

actions, which were consolidated by the district court on April 21, 2015. On April

20, 2015, non-parties 1-800 Contacts and Costco Wholesale (“Costco”) (the

“intervenors” collectively, with the AG the “Opponents”) intervened in the

proceedings. On April 28, 2015, the Opponents filed oppositions to plaintiffs’

motions for a preliminary injunction.

In their opposition papers, none of the Opponents sought to defend the

Utah law as written. (See, e.g., A-400 (Defendants’ Memorandum in Opposition to

Plaintiffs’ Motions for Preliminary Injunction (“AG Br.”) at 8).) Instead, in tacit

recognition of the law’s impermissible extraterritorial effects, they offered

narrowing constructions aimed at preserving the law’s constitutionality, mainly by

limiting the law’s application to a manufacturer’s dealings with Utah retailers.

Thus, according to the AG, the first part of the Utah law prohibits contact lens

manufacturers from taking any action “that has the effect of fixing or otherwise

controlling the price that a [Utah] contact lens retailer charges or advertises for

contact lenses.” ( Id.) Similarly, according to the AG, the second part of the Utah



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law prohibits manufacturers from “discriminat[ing] against a [Utah] contact lens

retailer” based on, among other things, whether the retailer is “authorized by law to

prescribe contact lenses.” ( Id.) According to the AG, the Utah law does not

extend its protections to non-Utah contact lens retailers. On the other hand,

according to the AG, the Utah law does extend its protections to Utah retailers like

1-800 Contacts even when they sell to consumers outside Utah. Ninety-nine of 1-

800 Contacts’s sales are to out-of-state consumers. (See A-296 (Affidavit of Laura

Angelini (April 14, 2015) (“Angelini Aff.”) ¶ 11).) When probed by the district

court on this point at oral argument, the AG declined to exclude the possibility that

a contact lens manufacturer could be punished under the Utah law based upon its

discontinuing supply of products to a Utah retailer who made sales in violation of

the manufacturer’s policies to consumers outside Utah. (See A-847-48 (OA Tr.

63:17-64:3) (“I will answer that with a perhaps, but it would depend on the facts of

the case . . . .”).) The State thus continues to hold the sword of possible civil

penalties over the manufacturers regarding a Utah retailer’s sales in all 50 states.

E. The District Court’s Ruling.

On May 11, 2015, the district court denied plaintiffs’ motions for a

preliminary injunction.

Extraterritorial Effect/Direct Regulation of Interstate Commerce:

The district court concluded that the Utah law has no extraterritorial effects



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because, “[u]nder a deeply rooted and longstanding canon of construction, statutes

are presumed not to have extraterritorial effect.” (A-766-67.) It applied that

presumption because it failed to see a “clear indication of an extraterritorial

application in the statute at issue.” (A-767.) The court did not address plaintiffs’

arguments that the law regulated interstate commerce, and that it did so in a

manner that was direct and not merely “incidental” to regulation of purely

intrastate commerce. Most conspicuously, the court failed to explain how the

statute’s regulation of sales by Utah-based retailers, such as 1-800 Contacts, to

consumers in all 50 states could be reconciled with binding Commerce Clause

precedent.

Discrimination Against Interstate Commerce: The district court

also concluded that the Utah law does not impermissibly discriminate against

interstate commerce because “the court presumes the Utah Attorney General will

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

(A-771.) The district court further reasoned that, if out-of-state retailers will be

disadvantaged, that is only because the manufacturers may wish to continue their

UPPs outside of Utah, and therefore (in the district court’s view) the discrimination

flows from the UPPs and not from the Utah law. (A-768.) The district court did

not address that the Utah law, as construed by the AG, discriminates on its face

between Utah retailers and non-Utah retailers. Nor did the district court address



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the discriminatory effect of the second part of the law, asserting that “Plaintiffs’

constitutional concerns [with the AG’s enforcement of this provision] are

premature and speculative.” (A-770.)

Burden on Interstate Commerce: The district court concluded that

the Utah law did not impose an excessive burden on interstate commerce,

compared to the local benefits (i.e., “lower prices to Utah consumers” (A-771)) it

achieved. In reaching this conclusion, the court considered the burden on interstate

manufacturers associated with being forced to ship contact lenses to Utah under

circumstances under which it would otherwise not do so, “and that retailers in

Utah, but not retailers in the other 49 states, would be exempt from manufacturer

policies,” and concluded that these two burdens were no greater than the burdens

imposed by traditional state antitrust laws. (A-772) The court did not consider the

severe burden on interstate commerce imposed as a result of the Utah law’s

predominant application to transactions between one in-state retailer, 1-800

Contacts, and consumers outside Utah to whom 1-800 Contacts ships. It also

observed that the effects of the law upon interstate commerce would be “negated if

other states enact similar antitrust laws on their own.” ( Id .)

Irreparable Harm: The district court declined to find that

manufacturers would suffer irreparable harm in the absence of a preliminary

injunction. Because the AG had not yet brought an enforcement action against any



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manufacturer, the court reasoned that the prospect of such injury was “speculative

at this stage,” and dependent on “how section 905.1 will be enforced.” (A-772-

73.) The district court did not find that if the law was enforced according to its

terms (as narrowed by the AG in its brief), the forms of irreparable injury the

defendants had identified in their pre-enforcement challenge would not arise. Nor

did the court challenge the manufacturers’ observation that if the Utah law is

unconstitutional, the manufacturers will not be able to recover damages from the

state of Utah in light of the state’s sovereign immunity.

Balance of Hardships/Public Interest: Combining consideration of

these two factors (as is appropriate in a case to which the AG, charged with

protecting the public interest, is a party, see, e.g., Nken v. Holder , 556 U.S. 418,

435 (2009), the court found that injunction of the law would frustrate a measure

“the Utah legislature determined was necessary to protect consumers and promote

free competition.” (A-773-74) The court did not discuss the opposing hardships,

impediments to interstate commerce, and procompetitive benefits of their programs

that the manufacturers had identified in their moving papers, other than to observe

that “Plaintiffs were provided a fair opportunity to present their positions” to the

Utah legislature, but that the “people of Utah chose to enact section 905.1 to

eliminate price fixing in favor of free competition.” (A-774.) On May 12, 2015,

all three plaintiffs filed notices of appeal.



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SUMMARY OF THE ARGUMENT

The district court erred in denying a preliminary injunction against

enforcement of the Utah law because all of the requirements for enjoining this

unique statute were satisfied:

(1) Alcon and B+L are likely to succeed on the merits of their

claims that the Utah law violates the Commerce Clause. The Utah law

violates the Commerce Clause for at least the following reasons:

(a) The Utah law “directly regulates” interstate commerce

and has impermissible “extraterritorial effects.” The Utah law

directly regulates interstate commerce because it dictates the terms of

sales of contact lenses by Utah-based retailers, such as 1-800

Contacts, to consumers in all 50 states. Indeed, the law directly

compels interstate commerce because it authorizes the AG to sue any

out-of-state manufacturer that declines to supply contact lenses to

Utah-based discounters on account of their failure to abide by

uniform, nationally applied manufacturer policies. If the law goes

into effect, Alcon and B+L will be forced to ship contact lenses to

Utah retailers or face an enforcement action and civil penalties.

The Utah law also directly regulates interstate commerce

because it bars an out-of-state manufacturer from taking any action—



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even unilaterally—that has the effect of controlling the prices that a

Utah contact lens retailer charges or advertises for contact lenses

throughout all 50 states. Thus, for example, the Utah law forbids

Alcon or B+L from setting a maximum retail price for the sales of

their products in Alabama or a minimum resale price for the sale of

their products in California, because in doing so the program will

necessarily regulate the price at which a Utah retailer can engage in

interstate commerce with (i.e., shipment of products to) consumers in

those states.

Finally, the Utah law has impermissible extraterritorial effects

because all of the companies, and virtually all of the conduct, that it

regulates are out-of-state. There are no contact lens manufacturers or

distributors in Utah, and all of the activity involved in administering

and enforcing the programs affected by the Utah statute takes place

outside Utah.

(b) The Utah law impermissibly discriminates against

interstate commerce. The law discriminates on its face because, as

construed by the AG, the Amendment protects only “a [Utah] contact

lens retailer,” and not a non-Utah contact lens retailer, from any

policy or action by a manufacturer that affects the retail price at which



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contact lenses are sold. The law also discriminates in its practical

effect by enabling Utah retailers, but not non-Utah retailers, to sell

nationwide without regard to manufacturer policies. The law thus

permits Utah retailers like 1-800 Contacts to sell at lower prices than

non-Utah retailers, even outside Utah. Similarly, the law entitles “a

[Utah] contact lens retailer,” but not a non-Utah contact lens retailer,

to the benefits of every contact lens manufacturer program that is

designed for some kinds of retailers and not others, such as free trial

lenses and enhanced rebates that for years have been extended only to

ECPs and to retailers associated with an ECP. The unconstitutionally

discriminatory effects are the product of the operation of the Utah law,

not the operation of the manufacturer policies, because those effects

would not arise in the absence of the Utah law; the manufacturer

policies themselves do not treat in-state and out-of-state retailers

differently. Neither the AG nor the intervenors carried their burden,

or even made any real effort to carry their burden, to show that the

Utah law survives “strict scrutiny.” See, e.g., Or. Waste Sys., Inc. v.

Dep’t of Envtl Quality of Or., 511 U.S. 93-94, 100-01 (1994)

(explaining that discriminatory laws face a “virtually per se rule of



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invalidity” and must be invalidated unless they “pass the strictest

scrutiny”) (internal quotation marks and citation omitted).

(c) The Utah law imposes excessive burdens on interstate

commerce. The Utah law imposes considerable burdens on

overwhelmingly interstate commerce, which are not justified by the

putative local benefits: lower prices on some contact lens products

purchased by Utah consumers. Every manufacturer subject to penalty

under the Utah law is located outside Utah, and the statute interferes

with those manufacturers’ pricing policies in all 50 states. The statute

also burdens out-of-state retailers, whom the statute disadvantages

vis-à-vis Utah retailers, in particular 1-800 Contacts. Indeed, the vast

majority of retail sales affected by the Utah law are sales in interstate

commerce made by 1-800 Contacts to consumers in other states.

Thus, the effect of the law upon interstate commerce is direct and

primary, not merely incidental.

(2) Unless the Court enjoins enforcement of the Utah law,

Alcon and B+L will suffer at least three forms of irreparable harm.

First , Alcon and B+L will suffer a deprivation of constitutional rights

guaranteed by the Commerce Clause, which is per se an irreparable injury.

Second , Alcon and B+L will suffer financial losses that cannot be recovered



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because the State of Utah and the AG—the parties responsible for the

enactment and the enforcement of the Utah law—are immune from damages

suits. Third , Alcon and B+L will suffer intangible marketplace losses, such

as diminished incentives to innovate, that cannot be quantified or recovered.

(3) The balance of hardships and public interest factors favor

the granting of an injunction pending appeal. It is always in the public

interest to prevent the violation of a party’s constitutional rights, and the

district court’s observation that the public interest favors enforcement of

duly enacted laws proves too much: all unconstitutional laws are the

product of duly constituted legislative action. In this case, the harms are

compounded by the public harms that will result from enforcement of the

Utah law. Contact lens wearers will be less likely to be informed about new

products in the absence of the incentives created by the UPP and other

affected programs. And even if there were countervailing public interests

that favored enforcement, they would be mitigated by the consideration that

Alcon and B+L seek only a preliminary injunction to preserve the status quo

until this action is resolved on the merits.



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STANDARD OF REVIEW

The district court’s decision not to issue a preliminary injunction is

reviewed for abuse of discretion. See Awad v. Ziriax, 670 F.3d 1111, 1125 (10th

Cir. 2012). This Court reviews the district court’s factual findings for clear error

and its legal determinations de novo. See Heideman v. S. Salt Lake City, 348 F.3d

1182, 1188 (10th Cir. 2003). “An abuse of discretion occurs . . . when the trial

court bases its decision on an erroneous conclusion of law or where there is not a

rational basis in the evidence for the ruling.” Awad , 670 F.3d at 1125.

ARGUMENT

I.

ALCON AND B+L ARE LIKELY TO SUCCEED ON THE MERITS.

Alcon and B+L are likely to succeed on the merits of their claims

because the Utah law runs afoul of the Commerce Clause of the United States

Constitution. (U.S. Const. Art. I § 8 cl. 3.) “The Supreme Court ‘long has

recognized that th[e] affirmative grant of authority to Congress [to regulate

interstate commerce] also encompasses an implicit or ‘dormant’ limitation on the

authority of the States to enact legislation affecting interstate commerce.’” Quik

Payday, Inc. v. Stork , 549 F.3d 1302, 1307 (10th Cir. 2008) (alteration in original)

(quoting Healy v. Beer Inst., 491 U.S. 324, 326 n.1 (1989)). The Utah law exceeds

this limitation in at least three respects.



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A. The Utah Law Directly Regulates Interstate Commerce and HasImpermissible Extraterritorial Effects.

In declining to enter a preliminary injunction, the district court

reasoned that the manufacturers’ constitutional challenge was unlikely to succeed

only because “unless a statute gives a ‘clear indication of extraterritorial

application, it has none’” (A-767 (quoting Nevares v. M.L.S., 345 P.3d 719, 727

(Utah 2015))) and because the court could see “no clear indication of an

extraterritorial application” here (A-767). Putting aside that the “clear statement”

rule the district court purported to apply has no mooring in federal Commerce

Clause jurisprudence, the court’s inability to perceive the extraterritorial

application of this statute is puzzling. Whether read literally or as narrowed by the

AG, the Utah law regulates exclusively the activities of out-of-state companies and

regulates predominantly transactions by consumers located outside the State of

Utah. The law offers a casebook example of a law that regulates interstate

commerce directly—not merely, “incidentally”—and, as such, has impermissible

out-of-state effects.

“When a state statute directly regulates . . . interstate commerce,” the

Supreme Court will “generally [strike] down the statute without further inquiry.”

Brown-Forman Distillers Corp. v. N.Y. State Liquor Auth., 476 U.S. 573, 579

(1986). In addition, “the ‘Commerce Clause . . . precludes the application of a

state statute to commerce that takes place wholly outside of the State’s borders,



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whether or not the commerce has effects within the State.’” Healy, 491 U.S. at 336

(quoting Edgar , 457 U.S. at 642-43). Thus, a state statute that has “the practical

effect of extraterritorial control of commerce occurring entirely outside the

boundaries of the state in question” is “invalid per se.” KT & G Corp. v. Attorney

Gen. of Okla., 535 F.3d 1114, 1143 (10th Cir. 2008) (quoting Grand River Enters.

Six Nations, Ltd. v. Pryor , 425 F.3d 158, 168 (2d Cir. 2005)). In determining

whether a state statute directly regulates interstate commerce or has impermissible

extraterritorial effects, courts look to the effects of the state regulatory scheme.

See Brown-Forman, 476 U.S. at 579 (“We have also recognized that there is no

clear line separating the category of state regulation that is virtually per se invalid

under the Commerce Clause, and the category subject to the Pike v. Bruce Church

balancing approach. In either situation the critical consideration is the overall

effect of the statute on both local and interstate activity.”); Healy, 491 U.S. at 336

(“The critical inquiry is whether the practical effect of the regulation is to control

conduct beyond the boundaries of the State.”)

The Utah law directly regulates interstate commerce because it

(i) forbids “any action” by any “manufacturer,” having the “effect of fixing or

otherwise controlling the price” of contact lenses charged or advertised by a

“contact lens retailer” and (ii) prohibits “discriminat[ion] against a contact lens



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retailer” by the same class of entities without regard to whether the prohibited acts

take place or have effects within or outside Utah.

As an initial matter, all of the manufacturers regulated by the Utah

law are located outside Utah. Alcon is headquartered in Fort Worth, Texas; JJVCI

is headquartered in Jacksonville, Florida; B+L is headquartered in Bridgewater,

New Jersey; and CooperVision is headquartered in Pleasanton, California. (A-238

(Weisbarth Decl. ¶ 13).) Similarly, nearly all, if not all, contact lens distributors

are also located outside Utah. Moreover, the activities the law purports to control

also take place outside Utah. For example, all day-to-day activity and decision-

making by Alcon personnel regulated by the Utah law, including all activity

relating to the administration and enforcement of Alcon’s UPP and other programs,

takes place at Alcon’s headquarters. ( Id. ¶¶ 13, 26, 41 (A-238, 241, 245).) All

Alcon contact lenses shipped in the United States ship from Alcon’s facility in

Johns Creek, Georgia. ( Id. ¶ 16 (A-238).) Alcon has no facilities in Utah ( Id. ¶ 14

(A-238)); thus, all conduct by Alcon regulated by the statute takes place outside of

Utah.

But even clearer proof that the predominant focus of the Utah law is

the direct regulation of purely interstate commerce is that it regulates the sales of

contact lens products—all of which are manufactured by out-of-state entities—to

consumers in all 50 states. Indeed, the law bars any manufacturer from taking any



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action that has the effect of controlling the prices that a Utah contact lens retailer

charges or advertises for contact lenses for sales outside of Utah. For example, the

Utah law bars an out-of-state contact lens manufacturer from setting a maximum

retail price for the sale of its products by a Utah contact lens retailer to a customer

in Alabama. Similarly, the Utah law bars an out-of-state contact lens manufacturer

from setting a minimum resale price for the sale of its products by a Utah contact

lens retailer to a customer in California. By exempting Utah contact lens retailers

from contact lens manufacturer pricing policies for out-of-state purchases, the Utah

law directly regulates interstate transactions and has constitutionally impermissible

extraterritorial effects on the price of contact lenses paid by out-of-state

purchasers.3 Whatever may be Utah’s interest in regulating prices paid by its own

residents, it does not have any discernible interest in regulating the prices paid by

residents of other states. Yet under the AG’s construction of the law, the primary

effect of Utah’s enforcement of the law will be to regulate the prices paid for

3 See Healy, 491 U.S. at 336 (a state law may not have “the practical effect of

establishing ‘a scale of prices for use in other states.’”); Brown-Forman, 476 U.S.at 582 (“That the ABC law is addressed only to sales of liquor in New York isirrelevant if the ‘practical effect’ of the law is to control liquor prices in other

States.”); see also K-S Pharms., Inc. v. Am. Home Prods. Corp., 962 F.2d 728, 730(7th Cir. 1992) (“Any statute of the form ‘charge in this state the same price youcharge outside it’ carries the implied command: ‘Charge outside this state the same

price you charge inside it.’ This latter, implied (but inseparable) command, the[Brown-Forman] Court held, is a forbidden attempt to exercise extraterritorial

power.”).



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contact lenses by residents of states other than Utah. (See A-296 (Angelini Aff.

¶ 11).)

Unlike any law cited by the AG or the intervenors, the Utah law

compels out-of-state contact lens manufacturers to send inventory to Utah contact

lens retailers when they might otherwise choose not to, an aspect of the Utah law

not shared by any other state statute of which we are aware or that the AG or

intervenors have pointed to. Again, the Utah law prohibits a variety of practices

including maximum and minimum resale price policies and discrimination against

a Utah contact lens retailer based on the price charged for contact lenses. At the

same time, the Utah law also prohibits the enforcement of such contact lens

manufacturer policies when, as is the case with Alcon’s UPP, enforcement consists

of discontinuing the supply to any contact lens retailer that persists in selling UPP

products below the price specified by Alcon’s UPP. (See A-243 (Weisbarth Decl.

¶¶ 34-35).) As a result, the Utah law obligates a manufacturer who has seen a Utah

retailer disregard its policies (including, but not limited to, resale pricing policies),

to continue to send to that Utah retailer, for an indefinite period, truck shipments

and courier packages containing contact lenses, or else risk an enforcement action

by the AG. In short, if a contact lens manufacturer declines to deal with a Utah

retailer because Utah bans manufacturer pricing policies, then the manufacturer

apparently will be subject to enforcement action by the AG for taking action that



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has the effect of controlling prices and discriminating against a Utah retailer. Any

such enforcement action would have the constitutionally impermissible effect of

“project[ing] . . . one state regulatory regime into the jurisdiction of another State.”

Healy, 491 U.S. at 336-37.

The district court’s order did not meaningfully address any of the

controlling case law cited above, nor the per se prohibition under the Commerce

Clause on the direct regulation of interstate commerce by a state statute. Instead, it

assumed away the glaring constitutional defects in the Utah law by applying a

presumption against extraterritorial application of a state statute under Utah law

and further presuming that “the Utah Attorney General will enforce the statute in a

manner that does not violate the Commerce Clause.” (A-767, 771.) By essentially

delegating assessment of the constitutionality of the law to the state official

obligated to enforce it, the district court failed to address the distinguishing

features of the Utah law that are engaged however the AG chooses to enforce it:

(i) that it regulates only contact lens manufacturers and distributors that are located

out-of-state; and (ii) that it purports to affect—and indeed compel—conduct by

those manufacturers and distributors that occurs entirely out-of-state. For these

reasons, the district court erred by failing to address the constitutional flaws in the

Utah law, even as narrowed by the AG. Further, the district court’s statement that

the AG will enforce the statute in a manner that does not violate the Commerce



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Clause begs the core question—whether the statute itself violates the Commerce

Clause (as the Appellants maintain) or not (as the AG and intervenors maintain).

Appellants should not have to guess about the constitutional correctness of the

AG’s interpretation on pain of substantial civil penalties.

B. The Utah Law Impermissibly Discriminates Against InterstateCommerce.

The Commerce Clause prohibits states from discriminating against

interstate commerce in favor of in-state interests. Granholm v. Heald , 544 U.S.

460, 472 (2005). A statute may be discriminatory either “on its face or in practical

effect.” C & A Carbone, Inc. v. Clarkstown, 511 U.S. 383, 402 (1994). A law

discriminates on its face if it explicitly distinguishes between in-state and out-of-

state actors. See Wyo. v. Okla., 502 U.S. 437, 455 (1992). A law discriminates in

its effects if, despite having facially neutral text, “its effect is to favor in-state

economic interests over out-of-state interests,” C & A Carbone, 511 U.S. at 402, or

if it “alters the competitive balance between in-state and out-of-state firms,”

Kleinsmith v. Shurtleff , 571 F.3d 1039, 1041 (10th Cir. 2009).

A discriminatory law is “ per se invalid, save in a narrow class of

cases” in which the state can carry its burden of showing that the statute survives

“strict scrutiny.” See C & A Carbone, 511 U.S. at 392. Under that standard, a

discriminatory law must be declared invalid unless the state can prove that it

“advances a legitimate local purpose that cannot be adequately served by



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reasonable nondiscriminatory alternatives.” Or. Waste, 511 U.S. at 100-01

(internal quotation marks omitted).

1. The Utah law discriminates facially and in its effects.

The Utah law discriminates both on its face and in its practical effects.

As construed by the AG (A-400), subsection 1 of the Utah law protects “a [Utah]

contact lens retailer,” but not a non-Utah contact lens retailer, from manufacturer

pricing policies. Subsection 2 of the Utah law entitles “a [Utah] contact lens

retailer,” but not a non-Utah contact lens retailer, to manufacturer programs that

are designed for some kinds of retailers and not others, such as “fit” rebates and

trial lenses.4 The Utah law thus differentiates, by its terms, between Utah and non-

Utah retailers.

The Utah law also discriminates in its effects. Under subsection 1, “a

[Utah] contact lens retailer,” like 1-800 Contacts, can operate without regard to

manufacturer pricing policies nationwide, while all of its non-Utah-based

competitors must adhere to those policies to ensure continued supplies. The Utah

law gives in-state retailers a competitive advantage over every out-of-state retailer

4 Thus, the district court was wrong to characterize the law as “merelyrequir[ing] that manufacturers refrain from mandating price fixing within the stateof Utah and from discriminating against Utah retailers for reasons related to pricefixing.” (A-769.) By its terms, the law applies to additional forms ofdiscrimination, such as the provision of trial lenses to some retailers/ECPs, but notothers, or the provision of fit rebates.



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in every state, not just in Utah. This permits Utah contact lens retailers to sell

nationwide without regard to the pricing policies of contact lens manufacturers

while not providing the same advantage to out-of-state contact lens retailers.

Similarly, subsection 2 guarantees to “a [Utah] contact lens retailer” who does not

prescribe lenses (e.g., 1-800 Contacts), but not to a similar non-Utah retailer,

access to manufacturer programs nationwide (such as “fit” rebates and free trial

lenses) that are designed for ECPs. In effect, this subsection extends to Utah

contact lens retailers a “most favored nation” treatment under which they must

receive the benefits of any program a contact lens manufacturer offers to any ECP

nationwide. Thus, a contact lens manufacturer is prohibited from offering an ECP

in Connecticut a volume discount not offered to a Utah contact lens retailer.

Similarly, the Utah law mandates that a contact lens manufacturer provide a Utah

contact lens retailer with the same rebate offered to contact lens retailers in

California who are associated with ECPs.

The district court dismissed these discriminatory aspects of the law on

the ground that any discrimination against out-of-state contact lens retailers “is

entirely the result of Plaintiffs’ pricing policies—not any action taken by Utah”

(A-768 (quoting Costco Opp’n at 14)), and thus concluded that contact lens

manufacturer policies, and not the Utah law, produce the discriminatory effects.

(See A-768 (“Section 905.1 in no way requires or anticipates that out-of-state



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retailers will continue to be subject to UPPs.”).) This conclusion is erroneous as a

matter of fact and law.

As a factual matter, it was an error for the district court to conclude

that the Utah law merely exempts Utah contact lens retailers from contact lens

manufacturer pricing policies (although that alone is sufficient to render it

unconstitutionally discriminatory). To the contrary, as demonstrated above, the

Utah law not only exempts Utah contact lens retailers from the terms of contact

lens manufacturers’ UPPs, but also mandates “most favored nation” treatment for

all Utah contact lens retailers under any contact lens manufacturer program

operated nationwide that extends benefits exclusively to ECPs or ECP-associated

contact lens retailers. As a result, by operation of Utah law, all non-ECP Utah

contact lens retailers (including 1-800 Contacts) will gain a competitive advantage

over their similarly-situated out-of-state counterparts, a result that is impermissible

under the Commerce Clause.

As a legal matter, the district court erred in holding that it is the

manufacturers’ policies, and not the unconstitutional effects of the Utah law, that

result in discrimination. By that logic, to avoid the Utah law producing

discriminatory effects, it falls upon the manufacturers to adapt or abandon their

nationwide policies. But as Alcon and B+L observed to the district court, it is the

unconstitutional prohibitions of the Utah law that bring about its discriminatory



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effects, and those constitutional defects cannot simply cured by requiring cessation

of the prohibited conduct. Were it otherwise, no law prohibiting conduct would

ever be unconstitutional because the state could always respond with the circular

argument that a law’s constitutional infirmity can be avoided essentially by

complying with the prohibition.5 The district court also did not address the

Supreme Court’s holding to that effect in Hunt v. Wash. State Apple Adver.

Comm’n, 432 U.S. 333, 350-51 (1977), in which a North Carolina law was found

to be discriminatory in violation of the Commerce Clause because its prohibitions

included a ban on Washington apple growers from shipping containers of apples

into North Carolina that displayed Washington quality stamps. There, as here, it

could have been argued that any discrimination resulted only from the Washington

growers’ practice of displaying quality stamps on their shipping containers, and

that such discrimination could be avoided by abandoning their longstanding

practice of doing so. Instead, the Supreme Court struck down the statute, finding

that its “leveling effect . . . insidiously operate[d] to the advantage of local apple

producers”, id. at 351, and noting that it required “Washington growers . . . to alter

5 For example, a law subjecting to penalty those who engage in a form of prayer could be upheld against constitutional challenge under the Free ExerciseClause on the theory that an individual could engage in different, non-proscribedforms of prayer.



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their long-established procedures . . . or abandon the North Carolina market,” id. at

340. Because the same is true of the Utah law, it should be struck down.

The district court was also wrong to dismiss these concerns on the

ground that Utah Code § 58-16a-904, in place since 2006, already requires contact

lens manufacturers to certify to the AG that their contact lens products are “made

available in a commercially reasonable and nondiscriminatory manner.” (See A-

770.) The very target of the new Utah statute, the UPP, is a “nondiscriminatory”

policy under the older statute in that it applies uniformly to any retailer, equally,

whenever the retailer chooses to sell below the UPP price. It gives no retailer

favored or disfavored treatment. As evidenced by the legislative history and the

parties’ positions in this case, however, the new statute deems the application of

that nonselective policy to be a form of “discrimination” against a retailer who

“sells or advertises contact lenses for a particular price.” That is a far more

onerous prohibition that eliminates even “nondiscriminatory” policies such as the

UPP or any other manufacturer policy regarding price. In addition, unlike the new

Section 905.1, the older statute contains relevant exemptions, including that it

expressly does not require a manufacturer to (a) “sell contact lenses to different

contact lens distributors or customers at the same price;” (b) supply to a seller

“who is not in substantial compliance with Utah and federal law” (i.e., a gray

market seller), or (c) “sell to customers in all geographic areas lenses that are being



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test marketed on a limited basis in one geographic area,” Utah Code § 58-16a-905,

all practices that are prohibited under the new statute. Importantly, Section 904,

unlike Section 905.1, does not discriminate in its purpose or effect in favor of Utah

retailers over non-Utah retailers.

2. The discriminatory Utah law cannot survive strict scrutiny.

Where, as here, a law is discriminatory on its face or in its effects, the

law is “ per se invalid, save in a narrow class of cases” in which the state can carry

its burden of showing that the statute survives “strict scrutiny.” See C & A

Carbone, 511 U.S. at 392 (explaining that the state must demonstrate “that it has

no other means to advance a legitimate local interest”); Or. Waste, 511 U.S. at

100-01 (holding that a discriminatory statute faces a virtual “ per se rule of

invalidity” and must be struck down unless, under the “strictest scrutiny,” the state

can prove that it “advances a legitimate local purpose that cannot be adequately

served by reasonable nondiscriminatory alternatives”); Kleinsmith, 571 F.3d at

1040 (“A discriminatory law is virtually per se invalid.”) (internal quotation marks

omitted).

Neither the AG nor either of the intervenors carried their burden to

show that the discriminating terms and effects of the Utah law can survive strict

scrutiny. Indeed, they made no real effort to do so, which is sufficient by itself to

establish Alcon’s and B+L’s likelihood of success on the merits and warrant



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reversal. See Or. Waste, 511 U.S. at 100-08 (invalidating discriminatory state

statute that failed to pass strict scrutiny).

The district court appears to have rationalized any competitive

advantage the Utah law confers on Utah retailers by observing that the Utah law is

“nothing more than a state antitrust statute, tailored to a specific industry, which

the state has the power to enact.” (A-769.) But the Utah law has nothi

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Alcon Laboratories, Bausch & Lomb appeal to 10th Circuit Court

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