States, Industry Groups and Environmental Advocates Challenge California Plastics Rule

California's Senate Bill (SB) 54, the Plastic Pollution Prevention and Packaging Producer Responsibility Act (the Act), is facing legal challenges from states and industry groups that seek to challenge the Act's final regulations that went into effect on May 1, 2026. (See Holland & Knight's previous alert, "California's Final EPR Regulations Now in Effect: Key Deadlines and Action Items for Producers," May 11, 2026.)

SB 54 was enacted in 2022 and establishes a comprehensive extended producer responsibility (EPR) framework requiring producers of single-use packaging and plastic food serviceware to report and pay fees on covered material, engage in source reduction and achieve specified recycling rates, and ensure that covered material is recyclable or compostable by January 1, 2032.

The Act requires producers of "covered material," defined broadly to include nearly all single-use packaging, to join a Producer Responsibility Organization (PRO). The Circular Action Alliance (CAA) is currently the sole approved PRO in California. Producers are required to register with the CAA, report covered material data and pay fees to fund the state's recycling and circular economy programs.

The Lawsuits

Within weeks of the regulations taking effect, two separate lawsuits were filed challenging the regulatory framework from opposite directions. Environmental groups contend the regulations do not go far enough to carry out the Act's environmental mandates, while a coalition of states and the wholesale-distribution industry contends that the entire statutory and regulatory scheme is unconstitutional.

Challenge by Environmental Groups

On June 2, 2026, various environmental groups filed a complaint against the California Department of Resources Recycling and Recovery (CalRecycle) and its Director Zoe Heller in California state court.

The environmental petitioners allege that key provisions of CalRecycle's final implementing regulations are inconsistent with SB 54 and arbitrary, capricious, or without reasonable or rational basis. Their claims center on three main regulatory deficiencies:

• Hazardous Waste and Chemical Recycling. The petitioners contend that the final regulations improperly allow chemical recycling technologies (such as pyrolysis) that the legislature intended to exclude by defining "significant amounts of hazardous waste" in a way that exempts waste handled under a valid permit. They also challenge the regulations' use of the federal definition of "hazardous waste" rather than California's more stringent state-law definition.
• Viable Responsible End Markets and Toxic Materials. The petitioners allege that the regulations fail to define what constitutes a "viable" responsible end market for covered material and fail to elaborate on the Act's requirement that covered material containing toxic heavy metals, pathogens or additives be subject to increased fees.
• Federal Law Conflict Provisions. The petitioners challenge the regulations' process for granting exclusions based on claimed conflicts with federal law, arguing it allows material to be excluded indefinitely without a determination that a conflict actually exists and lacks adequate time limitations or reevaluation requirements.

Challenge by Multistate Coalition

On June 22, 2026, a coalition of 17 state attorneys general (led by Nebraska and including Alabama, Florida, Georgia, Idaho, Indiana, Iowa, Louisiana, Missouri, Montana, North Dakota, Oklahoma, South Carolina, South Dakota, Texas, Utah and West Virginia), together with the National Association of Wholesaler-Distributors (NAW), filed a complaint against CalRecycle Director Heller in her official capacity, as well as the CAA, in California federal court.

NAW is a national trade association whose members constitute wholesalers and distributors across the U.S., including members that conduct business in California. NAW's members import, distribute or supply packaged goods in and into California and are subject to the Act's requirements.

The complaint raises sweeping constitutional challenges to the Act itself and its implementing regulations, including:

• Commerce Clause. The plaintiffs allege the Act discriminates against interstate commerce by deterring business relationships with out-of-state manufacturers and recyclers, imposing fees on goods merely transiting through California and threatening to fragment the national economy. Further, they claim the $500 million annual "environmental mitigation surcharge" and individual assessment fees constitute unfairly apportioned taxes that fail constitutional standards under the commerce clause.
• First Amendment. The plaintiffs challenge the Act's prohibition on passing fees to consumers "as a separate item on a receipt or invoice," arguing it is a content-based restriction on political or commercial speech. They also allege the Act violates the First Amendment's protections against compelled association by effectively requiring all producers to join and fund the CAA.
• Unlawful Delegation of Government Authority. The plaintiffs allege the Act unconstitutionally delegates broad regulatory, fee-setting and enforcement authority to the CAA without adequate legislative standards or procedural safeguards – a violation of the federal due process clause and California's nondelegation doctrine.

This is the second lawsuit filed by NAW challenging the constitutionality of state EPR laws. In February 2026, a federal court in Oregon granted NAW members preliminary injunctive relief blocking enforcement of Oregon's Plastic Pollution and Recycling Modernization Act, finding it raised serious constitutional questions under the due process clause and dormant commerce clause. The merits trial in the Oregon case is scheduled for the week of July 13, 2026.

There is also an industry challenge in Colorado state court filed in March 2026. That case raises similar claims under the Colorado Constitution, including due process violations and nondelegation challenges, as well as statutory claims that Colorado Department of Public Health and Environment (CDPHE) violated the state's EPR statute. It also includes a First Amendment challenge under the U.S. Constitution to a provision prohibiting producers from disclosing compliance costs to consumers at the point of sale. The Colorado complaint cites the Oregon preliminary injunction as supporting authority for its due process claims. A motion to dismiss has been filed by CDPHE in the Colorado litigation, and a hearing on the motion is scheduled for July 2026.

Implications and Upcoming Deadlines

Despite the filing of these lawsuits, EPR obligations remain in full force and effect in California, Oregon and Colorado. As of the date of this Holland & Knight alert, no lawsuit in California or Colorado has resulted in a temporary restraining order, preliminary injunction or stay of the regulations. The preliminary injunction in Oregon narrowly applies to temporarily enjoin enforcement of the program in the state against members of NAW. Accordingly, producers and companies manufacturing, selling or distributing goods using covered materials into any EPR state should continue complying with all applicable requirements and deadlines.

Key upcoming dates for California's EPR program include:

• August 1, 2026 – Producers must submit Individual Source Reduction Plans to CAA.
• August 14, 2026 – The public comment period closes on CAA's draft producer responsibility plan, submitted June 15, 2026. Regulated entities should consider commenting on the plan, particularly given the pending legal challenges and potential for revisions to the regulatory framework.

Evolving Legal Landscape

The legal landscape surrounding state EPR programs is evolving rapidly. These latest lawsuits represent the most significant legal challenges to any state EPR program to date and could reshape the regulatory framework for EPR nationwide. Holland & Knight will continue to monitor these cases and provide updates.

For questions about how these lawsuits may affect your company's compliance obligations or for assistance navigating obligations imposed by any state's EPR program, please contact the authors or another member of Holland & Knight's Environmental Team.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.