California sued over alleged ‘pay-to-play’ fees funding green research

A Texas-based spray foam insulation company is suing California for forcing the business to pay money to fund “green research” — part of an allegedly unconstitutional regulation imposed on the company in order to do business in the state.

Quadrant Performance Materials accused the California Department of Toxic Substances Control of funneling the fee, amounting to two cents per pound, into research that they say could eventually destroy their business.

“The State requires producers of spray polyurethane foam (spray foam) to first fund private research
aimed at replacing the products they sell, effectively funding the termination of their business — research those companies cannot direct, cannot veto and will never benefit from,” the lawsuit stated.

Last month, the department began requiring spray foam manufacturers to pay two cents for every pound sold in the state.

Spray foam insulation is a plastic-based material sprayed as a liquid that rapidly expands and hardens into a thick, airtight sealing layer. It is often used in construction.

The state agency, which is in charge of mitigating the harms of toxic chemicals, had identified unreacted methylene diphenyl diisocyanates — found in spray foam — as a chemical of concern. The department labeled it a “respiratory sensitizer that can lead to asthma and allergic sensitization.”

However, alternative spray foams without the chemicals are not “functionally acceptable” or technically feasible, Quadrant said in a report to the state agency.

As a result,  the agency created a Green Chemistry and Engineering Innovation Fund that would help research and develop a safer alternative. It ordered Quadrant to pay two cents per pound of spray into the fund, the lawsuit said, for five years or until the funding goal is reached.

That demand is outrageous, said Christian Townsend, an attorney with Pacific Legal Foundation, which is representing the company.

“California cannot create a pay-to-play system requiring manufacturers to fund government-preferred ideas just to sell spray foam in California,” Townsend said.

The lawsuit claims that companies are not allowed to do their own research as a possible solution.

If the funds do end up helping creating a foam spray alternative, the grantee would have intellectual property rights over the invention, meaning Quadrant couldn’t use the alternative unless it gets licensed.

Essentially, Quadrant faces the real possibility of no longer selling in California, the lawsuit alleged. The regulation discriminates against out-of-state companies which are only shipping a lawful product into the state.

“The First Amendment protects businesses from being forced to fund speech they did not choose, and entrepreneurs like Quadrant deserve the freedom to grow, innovate, and serve their customers without such unconstitutional burdens,” Townsend added.

There’s also potential violations of the Commerce Clause, the lawsuit claimed, which forbids a state from burdening interstate commerce to avoid out-of-state competition.

The California Post reached out to the state department for comment.

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