Bottle Bill Counter Claim

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------x INTERNATIONAL BOTTLED WATER : ASSOCIATION; NESTLÉ WATERS NORTH : AMERICA, INC; and POLAR CORP. d/b/a : POLAR BEVERAGES, : : Plaintiffs, : : - against : : DAVID A. PATERSON, in his official capacity as : Governor of the State of New York, et al., : : Defendants. : ---------------------------------------------------------------x

09-CV-4672 (DAB)

DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION TO MODIFY THE PRELIMINARY INJUNCTION

ANDREW M. CUOMO Attorney General of the State of New York Attorney for Defendants 120 Broadway, 24th floor New York, New York 10271 (212) 416-8618/6536 JUNE DUFFY FREDERICK H. WEN Assistant Attorneys General of Counsel June 9, 2009

TABLE OF CONTENTS Page TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii PRELIMINARY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 STATEMENT OF FACTS AND PROCEDURAL HISTORY . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Prior Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The Amendments to the Bottle Bill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 LEGAL STANDARDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 POINT I JUSTICE REQUIRES THAT THE PRELIMINARY INJUNCTION ISSUED ON MAY 29, 2009, BE MODIFIED TO ENJOIN ONLY THE PROVISIONS OF THE BOTTLE BILL AMENDMENTS CHALLENGED BY PLAINTIFFS AND FOUND BY THE COURT TO BE UNCONSTITUTIONAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 A.

The Language of the Preliminary Injunction Does Not Accurately State The Court’s Ruling From the Bench and Should Be Modified . . . . . . . . . . . . . . . . . . 14

B.

The Order Should Be Modified As It Is Internally Inconsistent and Ambiguous and Therefore Violates Rule 65(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

C.

In Any Event, Only the Provision of the Bottle Bill Amendments Found to be Invalid by the Court Should Be Severed, With the Remaining Unchallenged Provisions Left Intact and Enforceable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

POINT II THE AMOUNT OF THE BOND POSTED BY PLAINTIFFS MUST BE INCREASED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

i

TABLE OF AUTHORITIES FEDERAL CASES

Page

Alabama v. U.S. Army Corps of Engineers, 424 F.3d 1117 (11th Cir. 2005), cert. denied 547 U.S. 1192 (2006) . . . . . . . . . . . . . . . . 13 Alaska Airlines, Inc. v. Brock, 480 U.S. 678 (1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19-21 Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049 (2d Cir. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Building and Construction Trades Council v. Downtown Development, Inc., 448 F.3d 138 (2d Cir. 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Corning Inc. v. Pic Vue Electrics, Ltd., 365 F.3d 156 (2d Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 EEOC v. CBS, Inc., 743 F.2d 969 (2d Cir. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 EEOC v. Westinghouse Electric Corp., 765 F.2d 389 (3d Cir. 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Fair Housing in Huntington Committee v. Town of Huntington, 316 F.3d 357 (2d Cir. 2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Global Switching Inc. v. Kasper, 2006 U.S. Dist. LEXIS 44450 (E.D.N.Y. June 29, 2006) . . . . . . . . . . . . . . . . . . . . . . . . 11 Goldic Electrical Inc. v. Loto Corp. USA, 27 Fed. Appx. 71, 2001 U.S. App. LEXIS 25388 (2d Cir. 2001) (summary order) . . . . 17 Grace v. Rosenstock, 228 F.3d 40 (2d Cir. 2000), cert. denied, 532 U.S. 923 (2001) . . . . . . . . . . . . . . . . . . . . 12 Gunn v. University Committee to End War, 399 U.S. 383 (1970) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Ibeto Petrochemical Industrial Ltd. v. M/T Beffen, 475 F.3d 56 (2d Cir. 2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ii

Ideal Toy Corp. v. Sayco Doll Corp., 302 F.2d 623 (2d Cir. 1962) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 In re Worldcom, Inc. Sec. Litigation, No. 02 Civ. 3288, 2007 U.S. Dist. LEXIS 76272 (S.D.N.Y. Oct. 16, 2007) . . . . . . . . . . 14 Inverness Corp. v. Whitehall Laboratoriess, 819 F.2d 48 (2d Cir. 1987) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Joseph Scott Co. v. Scott Swimming Pools, Inc., 764 F.2d 62 (2d Cir. 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Mead Johnson & Co. v. Abbott Laboratories, 201 F.3d 883 (7th Cir.), cert. denied 531 U.S. 917 (2000) . . . . . . . . . . . . . . . . . . . . . . . 22 Metropolitan Opera Association, Inc. v. Local 100, Hotel Employees and Restaurant Employees International Union, 239 F.3d 172 (2d Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Moore v. Consolidated Edison Co. of N.Y. Inc., 409 F.3d 506 (2d Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 National Advertising Co. v. Babylon, 900 F.2d 551 (2d Cir. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 New York v. Oneida Indian Nation, 78 F. Supp. 2d 49 (N.D.N.Y 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19-21 New York v. Shinnecock Indian Nation, 560 F. Supp. 2d 186 (E.D.N.Y. 2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 15-16 Nichols Media Group, LLC v. Town of Babylon, 365 F. Supp. 2d 295 (E.D.N.Y. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Okaw Drainage District of Champaign and Douglas County v. National Distillers and Chemical Corp., 882 F.2d 1241 (7th Cir. 1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Rosen v. Siegel, 106 F.3d 28 (2d Cir. 1997) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13-14 Russell v. Farley, 105 U.S. 433 (1882) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

iii

S. C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232 (2d Cir. 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Starter Corp. v. Converse, Inc., 170 F.3d 286 (2d Cir. 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Sunward Electrics, Inc. v. McDonald, 362 F.3d 17 (2d Cir. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Weight Watchers International v. Luigino's, Inc., 423 F.3d 137 (2d Cir. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11-12 FEDERAL STATUTES 42 U.S.C. § 1983 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 FEDERAL RULES OF CIVIL PROCEDURE Rule 52(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Rule 54(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Rule 60(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Rule 65(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1-2, 13, 15, 17 STATE STATUTES New York Environmental Conservation Law (“ECL”): ECL § 27-1005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ECL § 27-1012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 7-8 ECL § 27-1012.12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 15, 17, 19-21, 24 ECL § 27-1018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ECL § 27-1019 (2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 21 Article 27, Title 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Part SS of Chapter 59 of the Laws of 2009, § 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 7 Returnable Container Act (“RCA”) Chapter 200 . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5, 7-8 STATE RULES AND REGULATIONS 6 NYCRR Part 367 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 OTHER AUTHORITIES WRIGHT , MILLER & KANE, Federal Practice and Procedure, Civil 2d, § 2947 . . . . . . . . . . . . . . 13 § 2955 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 iv

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------x INTERNATIONAL BOTTLED WATER : ASSOCIATION; NESTLÉ WATERS NORTH : AMERICA, INC; and POLAR CORP. d/b/a : POLAR BEVERAGES, : : Plaintiffs, : : - against : : DAVID A. PATERSON, in his official capacity as : Governor of the State of New York, et al., : : Defendants. : ---------------------------------------------------------------x

DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION TO MODIFY THE PRELIMINARY INJUNCTION 09-CV-4672 (DAB)

PRELIMINARY STATEMENT Defendants, David A. Paterson, Governor of the State of New York; Andrew M. Cuomo, Attorney General of the State of New York; Alexander B. Grannis, Commissioner of the New York State Department of Environmental Conservation; Patrick Hooker, Commissioner of the New York State Department of Agriculture and Markets; and Robert L. Megna, Commissioner of the New York State Department of Taxation and Finance (collectively “defendants”), respectfully submit this memorandum of law in support of their motion to modify the preliminary injunction, issued May 29, 2009, as it violates FED . R. CIV . P. 65(d) because it is overbroad and ambiguous, and to increase the amount of the bond posted by plaintiffs. Recent statutory amendments signed on April 7, 2009, expanded the scope of the current New York State Returnable Container Act (“RCA”), which already required retailers, distributors, redemption centers, and bottlers to collect and redeem deposits on several beverage containers such as aluminum cans, glass, and plastic bottles for soft drinks, mineral and soda water, and beer. N.Y. ENVTL. CONSERV . LAW §§ 27-1003(1)-(2) (1982).

Most of the RCA (the “Bottle Bill”)

Amendments, which should have gone into effect on June 1, 2009, expanded New York State’s recycling program to require retailers, distributors, redemption centers, and bottlers to start collecting and redeeming bottle deposits on all non-carbonated bottled water sold in New York, required beverage companies to return 80 percent of the unclaimed deposits to the State General Fund, and increased the handling fee from 2 cents to 3.5 cents a container for the redemption of containers. Plaintiffs challenged these provisions as applied to water bottles only, seeking a preliminary injunction. In granting the preliminary injunction on limited grounds, the Court nonetheless enjoined the Bottle Bill Amendments in their entirety until April 1, 2010. Defendants respectfully contend that the language of the preliminary injunction far exceeds the parameters of this litigation and the relief sought by plaintiffs, does not faithfully reflect the findings of fact and conclusions of law stated by Judge Griesa in his decision from the bench on May 27, 2009, after oral argument, and lacks the specificity required by FED . R. CIV . P. 65(d). The language of the order, proposed by plaintiffs and signed by the Court, enjoins defendants “from implementing and enforcing any and all other amendments to the Bottle Bill signed into law on April 7, 2009, until April 1, 2010” (Doc. #30; Decl. of Frederick H. Wen (“Wen Decl.”), dated June 9, 2009, Ex. D), while plaintiffs, both in their complaint and at oral argument, challenged only three discrete aspects of the bill: (1) the requirement that each container have a New York-exclusive Universal Product Code; (2) the June 1, 2009 effective date as providing too little time for compliance; and (3) the exclusion of water with sugar from the Bottle Bill Amendments. To the extent that the Court found one section of the Bottle Bill Amendments unconstitutional as violative of the Commerce Clause and another as provision as setting an “impossible deadline” for compliance with provisions related to bottled water, such provision are severable and the Court need not have 2

enjoined the entirety of the Amendments with such devastating effect on the environment and the public fisc. Further, plaintiffs conceded at oral argument that they could comply with the Bottle Bill Amendments by October 1, 2009, yet Judge Griesa endorsed their extension of the preliminary injunction until April 1, 2010. The expansive language of the relief granted – enjoining defendants from implementing and enforcing any and all other amendments to the Bottle Bill signed into law on April 7, 2009, until April 1, 2010 – failed to give sufficient weight to balancing the equities and has wrought harm to the public health of New York’s citizens and to the State’s public fisc as well as to small businesses which support New York’s recycling process. By enjoining the amendments to the Bottle Bill in their entirety for ten months, the Court ignored the reasons for its passage, namely that: (1) the litter of beverage containers, including a proliferating number of water bottles, not covered previously by the Bottle Bill, is a growing problem of State concern and a direct threat to the health and safety of New York’s citizens; (2) litter accumulation must be disposed of at increasing public expense; and (3) the uninhibited discard of beverage containers constitutes a waste of both mineral and energy resource. (Wen Decl., Ex. A, §§ 1-2). Further, the Bottle Bill Amendments also granted a needed increase in the handling fee from 2 cents to 3.5 cents per container to redemption centers and other businesses redeeming bottles, the first increase in eleven years (id., § 4, § 27-1007(6)), and protected beverage purchasers by mandating that a “New York Bottle Bill of Rights” be posted at the point of sale. Id., § 4, § 27-1007(2). Most importantly, the Bottle Bill Amendments provided that from June 1, 2009 forward, 80 percent of all unredeemed deposits would be remitted to the State with 20 percent remaining with the manufacturers. The Amendments set up a protocol for accomplishing this goal through the 3

registration (beginning on April 1, 2009) of deposit initiators with the New York State Department of Taxation & Finance and their issuance of quarterly reports and the transfer of funds electronically. N.Y. ENVTL. CONSERV . LAW § 27-1012.4. It is estimated that the State fisc would be increased through this amendment by $153 million dollars in the 2009 fiscal year which ends March 31, 2010. Unredeemed deposits from only previously-covered beverages (beer, soda, some wine) would bring in $86 million from June 1, 2009, through March 31, 2010. (Wen Decl., Ex. E, Decl. of Todd Scheuermann, Chief Budget Examiner in the New York Division of Budget, dated June 5, 2009, at 2-3). In other words, New York State is losing $235,000 per day ($86 million/365) because this provision unchallenged by the plaintiffs is now enjoined until April 1, 2010. The language of the preliminary injunction suspends implementation of all these provisions even though none were challenged in this litigation by the plaintiffs. For the reasons stated below, justice requires that the language of the preliminary injunction be modified and narrowed to reflect the Court’s actual and limited findings of fact and conclusions of law which prohibited the requirement for a New York-exclusive Universal Product Code and found June 1, 2009, to be too short of a deadline for compliance by the water bottlers with provisions related to bottled water. STATEMENT OF FACTS AND PROCEDURAL HISTORY The Court is respectfully referred to the declarations submitted herewith in support of defendants’ motion to modify the preliminary injunction for a fuller explanation of the amendments to the Bottle Bill and how they are designed to work, which will be briefly summarized here: Declaration of Cristin M. Clarke, Senior Attorney in the Office of Counsel in the New York State Department of Environmental Conversation (“DEC”), dated June 9, 2009, (“Clarke Decl.”) (Ex. E); Declaration of Diane O’Donnell, Tax Processing Administrator II in the Returns, Deposit, 4

Overpayments and Control Bureau of the New York State Department of Taxation and Finance, undated (“O’Donnell Decl.”) (Ex. F); Declaration of Todd Scheuermann, Chief Budget Examiner in the New York Division of Budget, dated June 5, 2009 (“Scheuermann Decl.”) (Ex. G). The Court is further referred to the Declaration of Kenneth A. Rosenblum, Counsel to the Empire State Beer Distributors Association (“Empire”), dated June 5, 2009 (“Rosenblum Decl.”) (Ex. H); the Declaration of Sheila Rivers, Chairperson of the Bottle and Can Redemption Association (“BACRA”), dated June 5, 2009 (“Rivers Decl.”) (Ex. I), and the Declaration of Carlos D. Nazario, former President of the Empire State Beer Distributors Association, and current President and Chief Executive Officer of Neighborhood Redemption Center, dated June 9, 2009 (“Nazario Decl.”) (Ex. J), which detail the devastating financial impact of the enjoining of the increased fees to redemption centers and other business handling the redemption of containers. The Bottle Bill and Its Amendments The RCA was originally enacted on June 15, 1982, by Chapter 200, Laws of 1982 and became effective July 1, 1983. The statutory authority is Article 27, Title 10 of the New York Environmental Conservation Law (“ECL”), sections 27-1001 to 27-1019, and the implementing regulations are at 6 NYCRR Part 367. The RCA was amended by Part SS of Chapter 59 of the laws of 2009 (hereinafter “Bottle Bill Amendments” or “Amendments”), which were signed into law by Governor Paterson on April 7, 2009, and amend Title 10 of Article 27 of the ECL. (Clarke Decl., ¶¶ 4-5). The RCA already required retailers, distributors, redemption centers, and bottlers to collect and redeem deposits on several beverage containers such as aluminum cans, glass, and plastic bottles for soft drinks, mineral and soda water, and beer. The Bottle Bill Amendments, would, inter alia, expand the Bottle Bill to require retailers, distributors, redemption centers, and bottlers to start 5

collecting and redeeming bottle deposits on all non-carbonated bottled water sold in New York, and require beverage companies to return 80 percent of the unclaimed deposits to the State General Fund. Further, the Bottle Bill would increase the handling charge from 2 cents a container to 3.5 cents, the first increase in eleven years. Given the short notice afforded defendants by plaintiffs’ order to show cause, the swift scheduling of oral argument and the limited nature of the relief sought by plaintiffs, certain facts, essential to defendants’ motion for modification, were not before the Court when it granted the preliminary injunction. Significantly, when the amendments were signed into law on April 7, 2009, certain provisions took effect immediately: a.

Section 1: addresses “legislative findings” and makes conforming changes to legislative intent;

b.

Section 10: authorizes DEC to promulgate rules and regulations necessary for implementation;

c.

Section 12: requires that DEC “establish a public education program to disseminate information regarding implementation of this title”;

d.

Section 13: adds a new ECL 27-1018 to establish a beverage container assistance program;

e.

Section 14: amends section 261 of the New York State Economic Development Law to expand waste prevention eligibility to include the costs of reverse vending machines and acquisition of real property for beverage container collection, sorting, and packaging.

f.

Section 15: amends section 54-0701 of the Environmental Conservation law so that the term “cost also includes beverage container assistance program grants to municipalities ad not-for-profit organizations pursuant to ECL section 27-1018; and amends the definition of “recycling project.”

g.

Section 16: sets forth the effective dates of each section in the amendments 6

in Part SS of Chapter 59 of the Laws of 2009. (Clarke Decl., ¶ 14). Other amendments took retroactive effect April 1, 2009: Section 2 and 3: Sections Two and Three make changes to the definitions in section 27-1003 of the RCA. Specifically, section Two adds the term “water”1 to the definitions of “beverages” and amends the definition of “beverage container.” Section 3 adds and defines the terms “bottler,” “deposit initiator,” “reverse vending machine,” and “universal product code.” Section 3 also amends the definitions of “distributor” and “redemption center.” (Clarke Decl., ¶¶ 16-17). Section 8: Section Eight of the Amendments also took effect on April 1, 2009, except that the requirements to make deposits, file reports, and make withdrawals under the new ECL section 271012, with respect to containers defined as beverage containers prior to April 1, 2009 (carbonated soft drinks, mineral water, soda water, beer, other malt beverages and wine products) was to first apply to the period beginning on April 15, 2009, and ending May 31, 2009. (Clarke Decl., ¶ 18). Other amendments were to take effect June 1, 2009, only three of which affect bottlers. Id., ¶¶ 20-23.2 Specifically, with respect to all other beverage containers (“water” beverages), the requirements to make deposits, file reports, and make withdrawals under the new ECL section 271012 (as added by section 8 of the 2009 Bottle Bill Amendments) would first apply to the period beginning June 1, 2009 and ending August 31, 2009. Also, water beverages would not be required

1

The definition of “water” included “any flavored water or nutritionally enhanced water,” but not “any beverage identified as a type of water to which a sugar has been added.” (Ex. A, § 2, § 27-1003(1)). 2

For a chart setting forth each provision of the Amendments with its respective effective dates, purpose, and impact, defendants refer the Court to the chart annexed to the Clarke Declaration as Exhibit A. 7

to have a refund value as required under ECL section 27-1005, as added by section 4 of the amendments, until June 1, 2009. (Clarke Decl., ¶ 21). Additionally, the requirements of subsection 12 of section 27-1012, did not take effect until June 1, 2009. Beginning June 1, 2009, deposit initiators were required to register the container labels of a beverage offered for sale in New York State on which they initiate a deposit. Those labels were required to have a universal product code (“UPC”), and such UPC was required to be New Yorkspecific.3 Id., ¶ 22. The program by which the State would recapture deposits representing unredeemed beverage containers, as provided by the amendments, was set up by the Department of Taxation and Finance. (O’Donnell Decl., passim). Registration for the program for deposit initiators (sellers of carbonated soft drinks, beer, malt beverages and certain wine products) subject to the RCA prior to April 1, 2009, took place from April 1, 2009 through June 1, 2009. Id., ¶ 7. The first payments to the State from these deposit initiators must be made by June 22, 2009. Id., ¶ 8. The New York State Division of the Budget estimates that 80 percent of all unredeemed deposits would bring $115 million dollars into the General Fund for fiscal year 2009-2010 (April 1, 2009 - March 31, 2010). (Scheuermann Decl., ¶¶ 4, 9). Eighty-six million dollars would be collected if the State received 80 percent of the deposits from previously covered containers while $29 million would be collected from water bottlers, now lost if the expansion of coverage to water bottlers is delayed until April 10, 2010. Id., ¶¶ 10-11. For the impact of the delay in receipt of the 1.5-cent increase in the handling fee for returned containers from 2 cents to 3.5 cents, defendants respectfully refer this Court to the Rosenblum,

3

This provision has been enjoined by the May 29, 2009 Order and is not challenged by defendants’ motion for modification. 8

Rivers, and Nazario Declarations, passim. (Wen Decl., Exs. H-J). All of those declarations stress the financial impact of the loss of the increase for more than 300 redemption centers, including beverage centers holding “C” licenses issued by the New York State Liquor Authority. Without modification of the preliminary injunction to allow the increase in the handling fee, the redemption centers may go out of business and jobs will be lost. Id., Exs. I, ¶ 23; Ex. J, ¶¶ 9-10. Prior Proceedings Plaintiffs, International Bottled Water Association (“IBWA”), a worldwide bottled-water trade association, and Nestlé Waters North America, Inc. (“Nestlé”), and Polar Corp., d/b/a Polar Beverages (“Polar”), two corporate bottled-water producers (collectively “plaintiffs”), bring this action against five New York State officials in their official capacities. The Complaint contains seven causes of action under 42 U.S.C § 1983, challenging the constitutionality of some of the Bottle Bill Amendments, asserting that they violate the Commerce Clause, the Equal Protection, and Substantive Due Process. (Doc. #1; Ex. B, Compl. at 7-13). Plaintiffs sought to enjoin the defendants from implementing and enforcing only certain provisions of these Bottle Bill Amendments, challenging the provisions that require all bottles sold in New York to have a New York-exclusive Universal Product Code, that provide an exception for bottles that contain sugar (“Sugar Water Exception”), and that set the effective date of June 1, 2009 for compliance by water bottlers. (Doc. #6, Pls.’ Mem. of Law in Support of Mot. for a Prelim. Inj. at 1-2). At oral argument on May 27, 2009, plaintiffs reiterated these claims. Plaintiffs’ counsel stated that they were objecting to: “number one, regulating our actions outside of New York; and number two, imposing those requirement with only seven weeks’ lead time; and number three, the sugar water exception.” (Doc. #29; Wen Decl., Ex. C, p. 30 at lines 9-12). In short, these were the only issues 9

considered by the Court before it granted the preliminary injunction from the bench. Plaintiffs’ counsel further stressed the importance of the concerns of the water bottlers and the difficulty of compliance in a short time because water bottles had never been covered by the Bottled Bill previously (Wen Decl., Ex. C, p. 5, 3-5; p. 6, 13-14; p. 7, 12-13), in contrast to beer and soda companies who had been subject to the container law since 1982. (Wen Decl., Ex. C, p. 5, 1526; p. 6, 16-23; p. 7, 12-22). Plaintiffs made emphatically clear that they were not challenging all aspects of the Bottle Bill, including the new 80 percent/20 percent split which remitted to the State 80 percent of the deposits never presented for redemption, 100 percent of which previously had provided a windfall to the manufacturers. (Wen Decl., Ex. C, p. 11, 17-23; p. 12, 19-23; p. 13, 1-11). Further, when questioned by the Court about how much time was needed for compliance with the Bottle Bill, plaintiffs’ counsel responded, “[W]e have submitted an affidavit indicating a bare minimum of October 1st.” Id. at p. 30, 21-23. At the end of the argument, the Court granted a preliminary injunction, placing his findings on the record. The Court enjoined the requirement for a New York-exclusive Universal Product Code, holding that “the provision is a violation of the commerce clause.”4 (Wen Decl., Ex. C, p. 55, 4-7). The Court further found June 1 “an impossible deadline” (id. at 55, 23), inviting “a proposed order providing for a more reasonable deadline.” Id. at p. 56, 1-2. Plaintiffs proposed and the Court signed, over defendants’ objections, an Order greatly expanding the Court’s ruling from the bench in paragraphs 2 and 3. Paragraph 2 reads: (2) Defendants are enjoined from implementing and enforcing any and all other amendments to the Bottle Bill 4

Defendants do not challenge that ruling which is set forth in the Order at paragraph 1. (Ex. D at 1). 10

signed into law on April 7, 2009, until April 1, 2010, to allow persons subject to the amendments sufficient time to comply with the law’s requirement. (Wen Decl., Ex. D). With respect to the Sugar Water Exception, the Court crossed out the paragraph enjoining that provision, and initialed it because the Court had made no mention of that exception in its ruling from the bench. (Wen Decl., Ex. C, pp. 54-56; Ex. D at 2). The defendants now move to modify the language of the preliminary injunction so that only provisions of the Amendments which affect water bottlers are enjoined as to the plaintiffs (§§ 4, 8, § 27-1012.12), that all other amendments may be implemented and enforced, and that the date for compliance by water bottlers be set for October 1, 2009, instead of April 1, 2010. LEGAL STANDARDS While an interpretation of a preliminary injunction does not change the status of the parties, a modification “alters the legal relationship between the parties, or substantially changes the terms and force of the injunction.” Weight Watchers Int’l v. Luigino’s, Inc., 423 F.3d 137, 142 (2d Cir. 2005). “The decision whether to modify a preliminary injunction involves an exercise of the same discretion that a court employs in an initial decision to grant or deny a preliminary injunction.” Global Switching Inc. v. Kasper, 2006 U.S. Dist. LEXIS 44450, at *33 (E.D.N.Y. June 29, 2006) (quoting Weight Watchers Int’l, Inc., 423 F. 3d at 141). “[A] preliminary injunction is a specific equitable remedy and thus, must be framed in such a way as to strike a delicate balance between competing interests. By necessity, the scope of the injunction must be drawn by reference to the facts of the individual case, reflecting a careful balancing of the equities.” Sunward Elecs., Inc. v. McDonald, 362 F.3d 17, 26 (2d Cir. 2004) (quoting Joseph Scott Co. v. Scott Swimming Pools, Inc., 11

764 F.2d 62, 67 (2d Cir. 1985)) (citation omitted) (upholding the issuance of the preliminary injunction, but remanding for the district court to “conduct a factual inquiry into the scope of the injunctive order and modify it if necessary.”). An interlocutory order, such as the one here, is subject to revision “at any time before the entry of [final] judgment.” FED . R. CIV . P. 54(b); Grace v. Rosenstock, 228 F.3d 40, 51 (2d Cir. 2000), cert. denied, 532 U.S. 923 (2001) (“All interlocutory orders remain subject to modification or adjustment prior to the entry of a final judgment adjudicating the claims to which they pertain.”). “[I]nterlocutory judgments are left subject to the complete power of the Court rendering them to afford such relief from them as justice requires.” FED . R. CIV . P. 60(b) Advisory Committee notes; see also Ideal Toy Corp. v. Sayco Doll Corp., 302 F.2d 623, 625 (2d Cir. 1963) (“[A]bsent an appeal, a district court has complete power over its interlocutory orders. . . . And, absent an appeal, it lay within the discretion of the district court to consider newly presented evidence. . . .”) (citations omitted). The defendants here seek a modification to “substantially change[] the terms and force of the injunction.” Weight Watchers Int’l, 423 F.3d at 142. ARGUMENT POINT I JUSTICE REQUIRES THAT THE PRELIMINARY INJUNCTION ISSUED ON MAY 29, 2009, BE MODIFIED TO ENJOIN ONLY THE PROVISIONS OF THE BOTTLE BILL AMENDMENTS CHALLENGED BY PLAINTIFFS AND FOUND BY THE COURT TO BE UNCONSTITUTIONAL. A preliminary injunction is an “extraordinary and drastic remedy,” Moore v. Consol. Edison Co. of N.Y. Inc., 409 F.3d 506, 510 (2d Cir. 2005) (citations omitted), whose purpose is to protect the plaintiffs from irreparable harm and to preserve the Court’s power to render a meaningful decision 12

after trial on the merits. In issuing such an order before the entire matter has been fully and fairly heard, great care must be taken to assure that the power of a court to require or to deter action does not result in unwarranted harm to the defendant or the public. Alabama v. U.S. Army Corps of Engineers, 424 F.3d 1117, 1128 (11th Cir. 2005), cert. denied 547 U.S. 1192 (2006) (quoting WRIGHT , MILLER & KANE, Federal Practice and Procedure, Civil 2d § 2947). Further, an injunction, preliminary or not, must be based on a Court’s “finding of fact and conclusions of law which constitute the grounds for its action.” FED . R. CIV . P. 52(a); Rosen v. Siegel, 106 F.3d 28, 32 (2d Cir. 1997). Such directive “encourages the trial judge to ascertain the facts with due care and to render a decision in accord with the evidence and the law.” Inverness Corp. v. Whitehall Labs, 819 F.2d 48, 50 (2d Cir. 1987) (per curiam); see also Fair Hous. in Huntington Comm. v. Town of Huntington, 316 F.3d 357, 364 (2d Cir. 2003). Rule 65 of the Federal Rules of Civil Procedure sets forth the “Contents and Scope of Every Injunction and Restraining Order.” Specifically, the Rule states that “every order granting an injunction . . . must . . . state the reasons why it issued[;] . . . state its terms specifically; and . . . describe in reasonable detail – and not by referring to the complaint or other document – the act or acts restrained or required.” FED . R. CIV . P. 65(d). “‘To comply with the specificity and clarity requirements [of Rule 65(d)], an injunction must be specific and definite enough to apprise those within its scope of the conduct that is being proscribed.’” New York v. Shinnecock Indian Nation, 560 F. Supp. 2d 186, 189 (E.D.N.Y. 2008) (quoting S. C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232, 240-41 (2d Cir. 2001)) (internal citation and quotation marks omitted). “‘This rule against broad, vague injunctions is designed to prevent uncertainty and confusion on the part of those to whom the injunction is directed, and to be sure that the appellate court knows precisely what it is 13

reviewing.’” Id. (quoting Rosen, 106 F.3d at 32) (citation and quotation marks omitted); see also In re Worldcom, Inc. Sec. Litig, 2007 U.S. Dist. LEXIS 76272, at *11 (S.D.N.Y. Oct. 16, 2007) (“Rule 65 is concerned with vagueness insofar as a vague injunction poses the threat of a contempt citation for violation of an order so vague that an enjoined party may unwittingly and unintentionally transcend its bounds.”) (internal citation and quotation marks omitted). A.

The Language of the Preliminary Injunction Does Not Accurately State the Court’s Ruling From the Bench and Should Be Modified The language of the preliminary injunction order violates all of these precepts. Here, the

Court specifically found that: •

the new law includes bottled water, where the old law did not (Wen Decl., Ex. C at p. 53);

•

one plaintiff was a trade organization relating to bottled water and another, a maker and distributor of bottled water, namely, Poland Spring (Id. at p. 54);

•

the statute required that a new code be placed on all bottles and mark each bottle as being for sale exclusively in New York State (Id.);

•

the code that required marketing exclusively in New York prevents commerce in those bottles outside New York (Id. at 54);

•

the above provision is a violation of the Commerce Clause (Id. at 55);

•

“the defendants are preliminarily enjoined from carrying out or enforcing the phase [sic] of the statute which provides that bottles with the new labels are to be sold exclusively in the State of New York (Id.);

•

about “the other phase [sic] of the statute, aside from the one I’ve just described about exclusivity, there is no objection.” (Id.);

•

except that there is “a very strong objection on . . . due process grounds of what is termed an impossible deadline to have all this arrangement done by June 1 (Id.);

•

the Court granted a preliminary injunction against the enforcement of the June 1, 2009 deadline and entertained a proposed order for a more reasonable deadline. (Id. at 5514

56). A comparison of the transcript with the Court’s order demonstrates that the procedural safeguards of Rule 65(d) were ignored or forgotten. Here, the preliminary injunction, crafted entirely by the plaintiffs with the exception of the elimination of the Sugar Water Exception, represents the very kind of overbroad and vague injunctive relief that courts within the Second Circuit have criticized. See Shinnecock Indian Nation, 560 F. Supp. 2d at 190. Specifically, not only does the preliminary injunction enjoin the defendants from “implementing or enforcing the New Yorkexclusive Universal Product Code provision of the [Bottle Bill] as amended, [ECL] § 27-1012.12,” but it also enjoins the defendants from “implementing and enforcing any and all other amendments to the Bottle Bill signed into law on April 7, 2009, until April 1, 2010, to allow persons subject to the amendments sufficient time to comply with the law’s requirements.” (Wen Decl., Ex. D). On its face, the preliminary injunction renders all implementation and enforcement of the Bottle Bill Amendments signed into law on April 7, 2009 – and not merely the challenged provision involving the NY-exclusive UPC with its June 1, 2009 effective date preliminarily found to be invalid by the Court – a violation of the injunction and, consequently, a basis for a civil contempt order. See, e.g., Shinnecock Indian Nation, 560 F. Supp. 2d at 190. However, the sole questions before the Court in the instant action were whether the NY-exclusive UPC provision and accompanying June 1, 2009 effective date were violations of the Commerce Clause and Substantial Due Process, respectively, and whether the Sugar Water Exception was a violation of the Equal Protection Clause. These limited questions determined the scope of the preliminary injunction hearing and underlay the Court’s ruling on the record on May 27, 2009. That the Court found ECL § 27-1012.12, the NY-exclusive UPC provision with its June 1, 2009 effective date, to be invalid does not justify an unlimited broadening 15

of the injunction. The plaintiffs had not challenged the remaining Bottle Bill Amendments in their motion for a preliminary injunction or in the complaint, and stated affirmatively that they had no objections to them during the May 27, 2009 hearing. (Wen Decl., Ex. C, p. 11, 17-23; p. 12, 19-23; p. 13, 1-11). Furthermore, when asked for a reasonable time frame for compliance, the plaintiffs stated at the hearing that they required a minimum of October 1, 2009. (Wen Decl., Ex. C, p. 30). But when the parties were directed to submit a time frame, the plaintiffs proposed an entire year for compliance, which the Court inexplicably endorsed. Id., at p. 30, 21-23. To so expand the scope of injunctive relief beyond its findings that the NY-exclusive UPC labeling provision and June 1, 2009 effective date were violations of the Commerce Clause effectively precludes the wholesale enforcement of the remaining unchallenged Bottle Bill Amendments for the next ten months. Thus, the overbroad and vague preliminary injunction must be modified because it is inconsistent with Second Circuit precedent vacating such overbroad and vague injunctions. See Shinnecock Indian Nation, 560 F. Supp. 2d at 191 (citing, inter alia, Ibeto Petrochemical Indus. Ltd. v. M/T Beffen, 475 F.3d 56, 65 (2d Cir. 2007) (ordering district court to “modify its injunction with a specificity consonant with [Second Circuit’s] determination” that “the injunction in this case cuts much too broadly”); Metro. Opera Ass’n, Inc. v. Local 100, Hotel Employees and Rest. Employees Int’l Union, 239 F.3d 172, 178-79 (2d Cir. 2001) (holding, in First Amendment case, that “the vagueness of this injunction serves as sufficient reason to require that we vacate it”); Starter Corp. v. Converse, Inc., 170 F.3d 286, 300 (2d Cir. 1999) (holding, in trademark case, that “[b]ecause the injunction exceeds the jury’s findings of infringement upon Converse’s rights, it is overly broad and, in that respect, represents an abuse of the discretion of the district 16

court”); and Okaw Drainage Dist. of Champaign and Douglas County v. Nat’l Distillers and Chem. Corp., 882 F.2d 1241, 1247-48 (7th Cir. 1989) (affirming district court’s denial of overbroad injunctive relief because “injunction so much broader in scope than the injury sought to be prevented would, if granted, exhibit a lack of equity on its face, and this is reason enough for refusing to issue the injunction”) (citation omitted)). Accordingly, this Court should modify the preliminary injunction to enjoin the defendants from implementing and enforcing the only provision that was deemed invalid, ECL § 27-1012.12, until October 1, 2009. As it stands, the preliminary injunction is both broader in both scope than the relief requested by the plaintiffs, including the minimum time frame requested, and it is too vague as to which of the remaining unchallenged and already-effective provisions of the Bottle Bill Amendments would be enjoined. B.

The Order Should Be Modified As It Is Internally Inconsistent and Ambiguous and Therefore Violates Rule 65(d) “Since an injunction . . . circumscribes [a person’s] conduct and does so under a threat of

punishment, it is reasonable to require that those enjoined be given fair notice of the conduct that is being punished.” Goldic Elec. Inc. v. Loto Corp. USA, 27 Fed. Appx. 71, 2001 U.S. App. LEXIS 25388, at *74 (2d Cir. 2001) (summary order) (quoting WRIGHT , MILLER & KANE, Federal Practice and Procedure, Civil 2d § 2955); see also Corning Inc. v. Pic Vue Elecs., Ltd., 365 F.3d 156, 157 (2d Cir. 2004). Specificity in the language of an injunction is “absolutely vital in a case where a federal court is asked to nullify a law duly enacted by a sovereign state.” Gunn v. University Committee to End War, 399 U.S. 383, 389 (1970). The Order violates FED . R. CIV . P. 65(d)(1)(C) because it does not describe in reasonable detail the act or acts restrained or required due to its internal inconsistency

17

and consequent ambiguity. The language of the Order challenged here is uncertain and equivocal. Paragraph 1 of the Order states unmistakably that “defendants are enjoined from implementing or enforcing the New York-exclusive Universal Product Code provision of the New York State Returnable Container Act (the “Bottle Bill”) as amended. . . .” (Wen Decl., Ex. D). In paragraph 3, the Court crossed out and initialed language enjoining the definition of water as set forth in the amended Bottle Bill. Id. at 2. If the Court understood when it initialed paragraph 2, which enjoins implementation and enforcement of “any and all other amendments to the Bottle Bill,” that the Amendments were enjoined in their entirety, then paragraph 1 is unnecessary and mere surplusage. Further, if the Court thought that the Amendments were enjoined in their entirety, then the Court need not have crossed out and initialed paragraph 3. As the language of the Order now stands, various questions logically arise. Pursuant to the removal of paragraph 3, are defendants allowed to enforce and implement the Sugar Water Exception because it is not enjoined? Or is the Sugar Water Exception enjoined by the language of paragraph 2? If the answer to this question is in the affirmative, then what is the purpose of paragraph 1, which the Court should have crossed out as the New York-exclusive Universal Product Code is presumably enjoined by the language of paragraph 2? Further, it is unclear whether this preliminary injunction – or any injunction which enjoins a specific effective date of a statute – can or does enjoin provisions of the same statute having earlier effective dates. Here, several provisions of the Bottle Bill Amendments were effective April 1, 2009; others were effective on April 7, 2009. (Clarke Decl., ¶¶ 14, 16-18, Ex. A). For instance, one of the amendments expanded the authority of the DEC to promulgate rules and regulations and another 18

granted the DEC the power to establish a public education program. Given the ambiguities of the May 29, 2009 Order, the DEC cannot promulgate rules and regulations on certain topics or establish a public education program without the fear that it will be held in contempt. Statutes must be interpreted, if possible to give each word some operative effect. Building and Construction Trades Council v. Downtown Dev., Inc., 448 F.3d 138, 156 (2d Cir. 2006) (citations omitted). The same standard applies to the language of a preliminary injunction for the protection of those enjoined. Justice requires that the language of the preliminary injunction be modified, given its internal inconsistencies and ambiguity and that the consequence of disobedience may be a finding of contempt. The threat of contempt is unjust to the State defendants where the language of the preliminary injunction is so inexact and incoherent. C.

In Any Event, Only the Provision of the Bottle Bill Amendments Found to be Invalid by the Court Should Be Severed, With the Remaining Unchallenged Provisions Left Intact and Enforceable. In any event, because the original Bottle Bill contained a severability clause that was not

repealed by the Bottle Bill Amendments, only the provision of the Bottle Bill Amendments that was found to be invalid by the Court, ECL § 27-1012.12, should be severed, leaving the remaining unchallenged provisions intact and enforceable. In determining severability, the Supreme Court has instructed that “‘[u]nless it is evident that the Legislature would not have enacted those provisions which are within its power, independently of that which is not, the invalid part may be dropped if what is left is fully operative as a law.’” New York v. Oneida Indian Nation, 78 F. Supp. 2d 49, 56 (N.D.N.Y 1999) (quoting Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 684 (1987)). Thus, federal courts “will honor the severability clauses so long as the valid and invalid portions of the [statute] are not so ‘intertwined’ that severance of the invalid 19

portion leaves the regulatory scheme in a manner unintended by the legislative body,” or “if such severance amounts to a judicial re-writing of the [statute].” Nichols Media Group, LLC v. Town of Babylon, 365 F. Supp. 2d 295, 318 (E.D.N.Y. 2005) (citing Nat’l Advertising Co. v. Babylon, 900 F.2d 551, 557-58) (2d Cir. 1990)). “The critical issue is whether the legislation would have been enacted if it had not included the unconstitutional provisions.” Nat’l Advertising Co., 900 F.2d at 557 (citing, inter alia, United States v. Jackson, 390 U.S. 570, 585 n. 27 (1968)). Put another way, “‘the unconstitutional provision must be severed unless the statute created in its absence is legislation that [the Legislature] would not have enacted.’” Oneida Indian Nation, 78 F. Supp. 2d at 56 (quoting Brock, 480 U.S. at 685). When a severability clause is contained in a statute, a presumption arises in favor of severability, and thus, “unless there is strong evidence that [the Legislature] intended otherwise, the objectionable provision can be excised from the remainder of the statute.” Id.; see also EEOC v. CBS, Inc., 743 F.2d 969, 971 (2d Cir. 1984) (stating “[w]hether or not [federal courts] should sever an unconstitutional provision from the remainder of the statute in which it appears is primarily an issue of legislative intent”), superseded by statute as stated in EEOC v. Westinghouse Electric Corp., 765 F.2d 389, 390-91 (3d Cir. 1985). Thus, this Court must look to the statute and its relevant legislative history to decide whether the New York State Legislature would have passed the remaining provisions of the Bottle Bill Amendments without ECL § 27-1012.12, the NY-exclusive UPC provision which had its own June 1, 2009 effective date. See CBS, Inc., 743 F.3d at 971. The original Bottle Bill contained a “severability” clause, added in 1982, which stated:

20

The provisions of this title shall be severable and if any phrase, clause, sentence or provision of this title, or the applicability thereof to any person or circumstance shall be held invalid, the remainder of this title and the application thereof shall not be affected thereby. ECL § 27-1019 (2009). This severability clause was not amended or repealed with the Bottle Bill Amendments. (Wen Decl., Ex. A, §§ 13-16). Because the Bottle Bill Amendments did not repeal the severability clause, therefore a presumption arises in favor of severability for which the plaintiffs must show “strong evidence” that the Legislature intended that the Bottle Bill Amendments, and ECL § 27-1012.12, were not severable. See Brock, 480 U.S. at 685; Oneida Indian Nation, 78 F. Supp. 2d at 56. This the plaintiffs simply cannot do, given the number of provisions which do not affect the plaintiffs (Clarke Decl., ¶¶ 20-23), and which they do not challenge here. POINT II THE AMOUNT OF THE BOND POSTED BY PLAINTIFFS MUST BE INCREASED. In any event, the $10,000 bond posted by the plaintiffs must be increased. FED . R. CIV . P. 65(c) requires that a Court may issue a preliminary injunction only if a movant gives security in an amount that the Court considers proper to pay the costs and damages sustained by any party found to have been wrongfully enjoined or restrained. See Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049, 1051 (2d Cir. 1990) (a party subjected to a preliminary injunction in district court who is later found to have been “wrongly enjoined” may recover against the security bond damages suffered as a result of the injunction). Here, whether or not the language of the Order is modified, the amount of the bond posted by plaintiffs, $10,000.00, must be increased to cover the possible losses suffered by the defendants and the State of New York during the time this injunction is in effect in the event it is found to have been 21

wrongly issued. An injunction covering “any and all other amendments” to the Bottle Bill will cause the New York State General Fund to lose an estimated $86 million by March 31, 2010, due to defendants’ inability to collect 80 percent of unredeemed deposits from beer and soda containers alone. An additional 29 million dollars will be lost in the same time frame from water bottlers covered by this preliminary injunction. (Scheuermann Decl., ¶¶ 10-11). The amount of an injunction bond is within the discretion of the Court. An error in setting the bond too high, however, is not serious because the damages caused by an erroneous preliminary injunction cannot exceed the amount of the bond posted as security. Russell v. Farley, 105 U.S. 433, 437 (1882); Mead Johnson & Co. v. Abbott Lab., 201 F.3d 883, 888 (7th Cir.), cert. denied 531 U.S. 917 (2000). A meager $10,000.00 bond simply will not cover even a meaningful fraction of the losses to the defendants, the State, and the citizens of New York imposed by this preliminary injunction. Assuming arguendo for the purposes of this calculation only, that granting more time for compliance with the Bottle Bill Amendments to the water bottlers is found to be correct, the State will still lose $86 million because the preliminary injunction prevents the collection of moneys from the beer and soda manufacturers. (Ex. E, Scheuermann Decl., ¶ 10). This result is particularly harsh where the plaintiffs affirmatively stated at oral argument that the 80/20 split of the value of unredeemed deposits was not challenged by their application for interim relief. (Wen Decl., Ex. C, p. 11, 22-24; p. 12, 1923; p. 13, 5-10). In the event it is determined in the future that the injunction was erroneously granted to the water bottlers, then the State would have lost an additional $29 million. (Scheuermann Decl., ¶ 11). Given the possibility of this enormous loss to the public fisc during a financial crisis when 22

New York State revenues have been buffeted by the downturn, this Court should exercise its discretion and order plaintiffs to post a bond in the amount of $115 million for all moneys lost or, for $86 million, if the injunction is not modified to allow collection of unredeemed deposit moneys from manufacturers of beverages covered by the Bottle Bill prior to the April 2009 Bottle Bill Amendments or, for at least $29 million if the preliminary injunction is modified so that it applies only to water bottlers.

23

CONCLUSION

For the reasons stated above, the defendants respectfully request that this Court modify the injunction to sever only the challenged provision, ECL § 27-1012.12, that was found to be invalid by the Court, which should only be enjoined until October 1,2009, and leave the remaining provisions ofthe Bottle Bill Amendments intact to be implemented and enforced by the defendants. Further, the Court should raise plaintiffs' bond from $10,000.00 to $115 million ifthe injunction is not modified. Respectfully submitted, ANDREW M. CUOMO Attorney General of the State of New York Attorney for Defendants 120 Broadway New York, New York 10271 By:

~!L~ FREDERICK WEN

H. Assistant Attorney General 120 Broadway New York, New York 10271 (212) 416-8618/6536 (212) 416-6075/6076/6009 (fax) Fred. [email protected]

JUNE DUFFY FREDERICK H. WEN Assistant Attorneys General of Counsel Date completed: June 9, 2009

24