United States District Court, D. Connecticut
ORDER ON MOTION TO DISMISS
A. Bolden United States District Judge.
VIZIO, Inc. (“VIZIO”), brought this action
against Defendant, the Commissioner of the State of
Connecticut Department of Energy and Environmental
Protection, challenging the constitutionality of
Connecticut's E-Waste Law. ECF No. 1.
previously filed a motion to dismiss under Rule 12(b)(6),
arguing that VIZIO had failed to state a claim upon which
relief could be granted. ECF No. 21. The Court granted the
motion to dismiss the Complaint in its entirety, dismissing
all of VIZIO's claims with prejudice, except for a
Dormant Commerce Clause claim based on an extraterritoriality
theory. ECF No. 36. The Court gave Plaintiff leave to amend
its Complaint, but only to the extent of adding factual
allegations supporting a claim that the E-Waste Law directly
controls Plaintiff's interstate prices. Vizio, Inc.
v. Klee, No. 3:15-CV-00929 (VAB), 2016 WL 1305116, at
*15 (D. Conn. Mar. 31, 2016).
then amended its complaint. ECF No. 41. Defendant now moves
to dismiss the Amended Complaint under Rule 12(b)(6), arguing
that VIZIO has failed to plead that the E- Waste law directly
controls interstate prices and therefore has failed to state
a claim upon which relief could be granted. ECF No. 44.
reasons that follow, the Court GRANTS Defendant's renewed
motion to dismiss because Plaintiff has failed to plead
factual allegations that the E-Waste Law directly controls
Plaintiff's interstate prices.
factual background of this case is described in greater
detail in the Court's prior order granting
Defendant's first motion to dismiss. See Vizio,
2016 WL 1305116, at *2-4. In the interests of clarity, the
Court also summarizes the relevant background of the case
is an American company that manufactures television sets.
Amend. Compl. ¶ 1, ECF No. 41. VIZIO was incorporated in
late 2002, and first entered the television market in 2003.
Id. ¶ 32. As a result of its relatively recent
incorporation, VIZIO has only distributed flat panel
televisions, not the bulkier cathode ray tube
(“CRT”) or rear projection televisions that were
common several decades ago. Id. ¶ 3.
2007, Connecticut enacted Public Act No. 07-189, which has
been amended several times and is codified at Conn. Gen.
Stat. Ann. §§ 22a-629 through 22a-640. The
Connecticut Department of Energy and Environmental Protection
(“DEEP”) subsequently promulgated regulations,
located at Conn. Agencies Regs. Sections 22-a-630(d)-1 and
22-a-638-1 (collectively, the “E-Waste Law”).
DEEP is responsible for administering the E-Waste Law, which
applies to each manufacturer of covered electronic devices
(“CEDs”). Conn. Gen. Stat. § 22a-630(a).
VIZIO is considered a “manufacturer” under this
statute. See Conn. Gen. Stat. §§
the E-Waste Law, each manufacturer must register with DEEP
and participate in the program to implement and finance the
collection, transportation, and recycling of CEDs. The
administration of the E-Waste program is funded by
registration fees. The initial registration fee for every
manufacturer is at least $5, 000. Television manufacturers,
such as VIZIO, must then pay subsequent annual registration
fees that are based on a sliding scale that is representative
of the manufacturer's current share of sales in the
national television market (“National Market
E-Waste Law uses a “market share” approach to
calculate each television manufacturer's costs under the
E-Waste program. Under this approach, the manufacturer's
costs are based on a percentage of the total weight of all
televisions that are recycled in a given period, regardless
of brand, multiplied by a specified price per pound. The
percentage of the total weight of all televisions that each
manufacturer is responsible for is based on its current
National Market Share (“National Market Share
to DEEP, VIZIO's billable national market share is
currently 17.16%. Amend. Compl. ¶ 34. DEEP previously
determined VIZIO's billable market share to be 14.33% in
2013, 14.52% in 2014, and 16.088% in 2015. Id. VIZIO
was, therefore, charged $414, 823.54 in 2013, $585, 669.23 in
2014, and $647, 141.72 in 2015 under the E-Waste Law. As of
December 31, 2015, VIZIO has spent over $2.5 million to
comply with Connecticut's E-Waste program. Id.
all of VIZIO's sales are to large retailers, and these
sales generally take place in states where the retailers have
distribution operations, such as New York. Amend. Compl.
¶ 33. After the retailers purchase the televisions, they
distribute them, at their own discretion, to various
locations throughout the country for resale to individual
customers. Id. VIZIO claims that it does not sell to
any distribution centers in Connecticut. Id. ¶
E-Waste Law and Interstate Television Prices
Amended Complaint brings the following new factual
allegations that it claims will support the dormant commerce
clause extraterritoriality claim and the allegation that the
National Market Share provision of the E-Waste law directly
“has controlled and will continue to control interstate
television prices.” Amend. Compl. ¶ 47.
Plaintiff alleges that the E-Waste Law imposes substantial
and disproportionate costs on low average-cost television
producers, like VIZIO, because the National Market Share
provision “most severely penalizes manufacturers that
have the highest National Market Shares.” Amend. Compl.
¶ 49. Plaintiff alleges that the E-Waste law directly
forces low average-cost producers to raise their television
prices, using the theory described below. Id.
to VIZIO, the television industry is a highly competitive
market. Amend. Compl. ¶ 50. The largest competitors in
that market, therefore, must be able to “implement and
sustain aggressive pricing strategies.” Id.
VIZIO alleges that, in this competitive market, “low
average cost producers drive down and establish minimum
prices” because such producers “can produce their
products at the lowest cost given competitive advantages such
as economies of scale or technological capabilities.
Id. ¶ 51. Low-average cost producers'
prices allegedly are “directly correlated to the
minimum of their average costs.” Id. ¶
then advances certain economic theories, arguing that
“[t]here will always be at least one low average-cost
producer in a competitive market that drives the overall
minimum market price” because “[o]ther firms with
higher average costs cannot consistently undercut the low
average-cost producers' prices” without incurring
losses and risking going out of business. Amend. Compl.
¶ 53. Firms with higher average costs generally choose
to charge higher prices “to avoid losses and stay in
business, ” which “inevitably” allows a low
average-cost producer to set the overall minimum market
further alleges that, because of their “competitive
advantages, ” i.e. low costs of production and
therefore low price, low average-cost producers will have the
highest National Market Shares. Amend. Compl. ¶ 54. When
a large manufacturer, like VIZIO, increases their prices,
their National Market Share declines. Id. According
to VIZIO, this means that there is a “direct
relationship between National Market Share and price.”
setting each manufacturer's costs based on its National
Market Share, the National Market Share provision allegedly
puts a “grossly disproportionate” share of the
Connecticut E-Waste program's costs on to low-average
cost producers, like VIZIO, because of the large National
Market Shares they obtain through their low prices. Amend.
Compl. ¶ 55. Because the costs imposed on television
manufacturers are based on National Market Share, the E-Waste
law may impose costs that are disproportionate to a
manufacturer's in-state market share. Id. ¶
56. VIZIO's National Market Share in 2013 was, for
instance, 25% to 50% higher than it's Connecticut state
market share. Id.
alleges that the E-Waste Law's imposition of
disproportionate costs on low-average cost producers -
producers with a high national market share because of low
prices due to having low-average costs - is the mechanism by
which the E-Waste Law “has controlled”
VIZIO's pricing in the national marketplace. Amend.
Compl. ¶¶ 56-57. VIZIO then argues that when
low-average cost producers raise their prices, the
“minimum price floor for televisions nationwide”
is then driven up because when low-average cost producers
have increased their prices, other manufacturers have
followed suit. Id. ¶ 57.
is, allegedly, one of at least 11 states that have enacted a
National Market Share-based approach for allocating e-waste
recycling costs. Amend. Compl. ¶ 58.
Connecticut Legislature and the Alleged Control of Interstate
further alleges that the legislative history behind the
E-Waste Law shows that the Connecticut General Assembly
“intended to control national television prices to
maintain pricing parity with neighboring states, ” and
intended to “shift the costs of the E-Waste Law to
out-of-state consumers.” Amend. Compl. ¶ 59.
to VIZIO, when Connecticut legislators were debating the
E-Waste Law, some allegedly expressed concern that
manufacturers could pass on the costs of the E-Waste Law to
Connecticut consumers by charging higher prices. Amend.
Compl. ¶¶ 59-60. As some legislators noted, if
manufacturers passed on the costs to Connecticut consumers,
customers would go to other states, such as Massachusetts, to
purchase electronics. Id. ¶ 60. Thus, some
legislators noted that one main goal of the e-waste recycling
program was to have it be “free of cost” to
Connecticut consumers. Id. ¶ 61. VIZIO alleges
that when the legislature enacted the E-Waste Law, they did
so knowing that there would be “costs somewhere”
that “someone will pay.” Id. ¶ 62.
Amended Complaint does not state exactly how the E-Waste Law
was intended to accomplish any of the above goals, whether to
(a) prevent manufacturers from passing on the costs to
Connecticut consumers specifically, (b) ensure that the
program was actually free of costs to Connecticut consumers,
or (c) pass the costs “somewhere” to
“someone.” The Amended Complaint instead points
to two theories of how the E-Waste Law may accomplish these
goals. Amend. Compl. ¶¶ 63-64.
VIZIO claims that the Connecticut legislature
“attempted to minimize price increases in Connecticut
by restricting access to the E-Waste Program to in-state
residents.” Amend. Comp. ¶ 63. The program only