Key Takeaways

• California’s extended producer responsibility (EPR) law, Senate Bill (SB) 54, is facing a broad constitutional challenge brought by 17 states and the National Association of Wholesaler-Distributors (NAW).
• The lawsuit targets core features of California’s EPR framework, including source-reduction mandates, recyclability and recycling-rate targets, producer fees, the $500 million annual environmental mitigation surcharge, and mandatory participation in the Circular Action Alliance (CAA).
• The lawsuit does not change current compliance obligations. Unless and until a court issues injunctive relief, California can enforce SB 54 deadlines, reporting requirements, and producer responsibility organization (PRO) participation obligations.
• Companies subject to California’s EPR program should continue building systems to report covered material, evaluate packaging reduction opportunities, and document assumptions underlying their producer-status determinations while the lawsuit proceeds.

California’s packaging EPR program has entered a new phase: litigation in federal district court. On June 22, 2026, 17 states and NAW filed suit challenging California’s Plastic Pollution Prevention and Packaging Producer Responsibility Act, also known as SB 54. NAW is also leading the federal court challenge against Oregon’s packaging EPR law. The California plaintiffs are seeking declaratory and injunctive relief blocking implementation and enforcement of the state’s packaging EPR program. This new federal lawsuit comes on the heels of a June 2026 state court lawsuit brought by environmental groups claiming that CalRecycle’s final regulations unlawfully weakened the state’s packaging EPR law.

For companies already navigating SB 54, the federal lawsuit lands at a critical moment. As discussed in our recent post, “Packaging EPR Hits Full Swing: Key Milestones Across California, Maryland, and Beyond,” producers in California were required to register with the CAA and submit two California-specific reports by June 1, 2026: a “Baseline Producer Report” establishing 2023 baseline supply and packaging data, and an “Annual Source Reduction Report” describing 2025 plastic use and source-reduction progress. That same June 1 deadline also corresponded with key EPR reporting milestones in Maryland, Minnesota, Washington, and Oregon, underscoring how other existing state packaging EPR programs are also now moving from design to implementation.

In the new federal lawsuit, NAW and the 17-state coalition allege that SB 54 unconstitutionally reaches far beyond California’s borders by conditioning access to the California market on compliance with the state’s packaging design, recycling, reporting, and fee obligations that will affect national supply chains. They focus on the law’s broad definition of “covered material,” its phased source-reduction mandates for plastics, its requirement that covered material be recyclable or compostable by 2032, and its plastic recycling-rate targets of 30% by 2028, 40% by 2030, and 65% by 2032.

The complaint also targets the economic architecture of the program. Plaintiffs challenge producer fee assessments administered through the CAA, California’s $500 million annual environmental mitigation surcharge, and the law’s prohibition on passing PRO fees through to consumers. They argue that these provisions function as taxes, burden interstate commerce, and restrict speech about the cost of the program.

A central theme of the complaint is that SB 54 may impose obligations on companies with little or no control over packaging design. According to NAW, some wholesalers and distributors are treated as “producers” merely because they introduce covered materials into California, even though packaging decisions are made upstream by manufacturers or brand owners. That conundrum will be familiar to businesses that have struggled to determine if they have compliance obligations as a “producer” across multiple EPR states when the statutes do not perfectly align.

The complaint asserts SB 54 violates the dormant Commerce Clause and Import-Export Clause of the U.S. Constitution, along with both federal and California free-speech clauses. The plaintiffs also argue that California unlawfully delegated substantial implementation authority to the CAA, a private entity, granting the CAA regulatory power over competitors and market participants without sufficient governmental safeguards.

Implications of Lawsuit for SB 54 Implementation

In February 2026, the U.S. District Court for the District of Oregon issued a preliminary injunction preventing Oregon from enforcing its packaging EPR law, the Plastic Pollution and Recycling Modernization Act, against NAW and its members. The court found that NAW raised serious questions about the law, including dormant Commerce Clause and due process claims, and concluded that the balance of hardships supported interim relief.

But the Oregon order also illustrates the limits of early litigation wins. The injunction is limited and only bars the state from enforcing the Oregon law against NAW and entities that were NAW members as of February 6, 2026, when the injunction was issued. Oregon’s Department of Environmental Quality did not pause enforcement for all producers, and Oregon has continued moving forward with implementing its EPR program and identifying noncompliant producers. See “Oregon Calls Out Noncompliant Producers as Packaging EPR Enforcement Era Begins.”

Unless the California district court grants similar injunctive relief, SB 54 remains fully in effect, and even if the court does grant an injunction, its scope may be limited. For now, regulated companies should continue building data systems for covered material reporting, evaluating packaging reduction opportunities, and documenting the assumptions they have used for determining their producer status. It is also a good time for companies that may be subject to SB 54 to review customer, supplier, distributor, and marketplace agreements to determine who bears responsibility for EPR registration, reporting, fees, and data delivery.

The litigation also reinforces the importance of multistate EPR governance. California, Oregon, Colorado, Maine, Maryland, Minnesota, and Washington share a general EPR direction, but their definitions, reporting categories, fee structures, and implementation timelines differ. A packaging decision made for California may have different consequences elsewhere, and vice versa.

In short, the new lawsuit challenging SB 54 raises questions about the ultimate fate of the law, but in the meantime, compliance is still mandatory. While the lawsuit may reshape California’s EPR program and potentially influence other state programs, producers should continue preparing for implementation while preserving records, flexibility, and documentation of their applicability determinations as the litigation develops.