Supporters of new state recycling laws are cheering a federal court decision in Oregon that could boost their chances of prevailing in similar legal challenges in California and Colorado.

Oregon last year became the first state to implement a so-called Extended Producer Responsibility law for packaging, but it certainly won't be the last, as more states consider enacting their own versions.

But soon after Oregon's Plastic Pollution and Recycling Modernization Act took effect, the state faced a lawsuit from a trade group representing 30,000 companies that distribute products there, claiming the EPR law violated the Constitution by imposing fees and other rules on packaging materials that other states don't impose.

A federal judge last week rejected the arguments after a five-day trial in July. The judge's 71-page opinion called the 2021 law innovative, nodding to the words of Supreme Court Justice Louis Brandeis, who said in 1932 that "a single courageous State may, if its citizens choose, serve as a laboratory, and try novel social and economic experiments without risk to the rest of the country."

A statement from the National Association of Wholesaler-Distributors, the group that filed the lawsuit, said it was "disappointed" with the outcome and was "reviewing its options for next steps."

"The district court's ruling is not the final word," the group said.

Supporters see it as a positive sign as they turn their attention to court challenges to EPR laws for packaging in California and Colorado.

"The ruling sets a strong tone for litigation against programs in other states, and further solidifies EPR as a policy driving generational change in how recycling operates in the U.S.," Kate Davenport, the chief impact officer of The Recycling Partnership, tells Barron's.

The Recycling Partnership, a nonprofit group whose members include representatives from major packaged goods brands, the waste and recycling industry, and canning and plastic trade groups, has been helping to craft EPR laws like the one in Oregon.

The recycling business in the U.S. is undergoing major shifts, as Barron's has reported, including the adoption of artificial intelligence and automation to improve material recovery rates and keep waste out of landfills. Local governments are looking to improve residential curbside recycling programs as they fight a looming trash crisis.

In the first year since the packaging program began, Oregon's EPR injected $30 million into local processing facilities, funded more than 70,000 new curbside recycling carts in local communities, and helped protect local ratepayers from volatile global commodity markets, Davenport noted.

Seven states have now enacted such laws, with variations from the Oregon model, and more states are considering their own.

The idea is to shift the financial burden of handling tons of plastic, paper, and glass packaging from local governments to the brands that choose the packaging, and then to offer incentives for those brands to adopt more recyclable packaging materials. The law establishes a group to collect fees from the producers and distributors of the packaging, and that money pays for local recycling infrastructure and educational programs.

Lawyers for the National Association of Wholesaler-Distributors argued that the Oregon law violates due process because it delegates power over administering the law to the private entity that collects the fees and sets the rates. They also said it violates the Constitution's protections for interstate commerce by making it burdensome and costly for brands that sell in multiple states to comply with Oregon-specific packaging rules.

NAW says it supports the idea of recycling and the so-called circular economy, but "we believe Oregon's law is unconstitutional and structured in a way that undermines, rather than advances, those goals."

But the judge rejected the arguments, again nodding to Brandeis by writing: "different state laws can help identify what forms of regulation work best and where improvement may be needed."

Betsy Stone, senior counsel at the law firm Foley & Lardner, said Justice Brandeis' "laboratories of democracy" opinion is often cited in American constitutional law. "State policy experimentation has often produced our nation's brightest policy ideas," Stone said. But critics would say "experimentation isn't always neatly contained within a state's borders."

The Oregon decision isn't binding outside the state, but it was decided in a federal court that shares the same appellate circuit with California. If the Oregon ruling is affirmed on appeal, its reasoning becomes binding in California and other Ninth Circuit federal courts, Foley's Stone said.

Colorado is in the 10th U.S. Circuit Court of Appeals.

"This is the first merits decision on a constitutional challenge to a modern packaging EPR law anywhere in the country and it went comprehensively for the state, rejecting every theory the challenger advanced," Stone says.

That means those who filed lawsuits in California and Colorado will have to distinguish their cases from Oregon.

Lawyers from Nixon Peabody posted a client note on their website that said for now producers should continue assessing whether they are covered by the law, keep track of state-specific reporting and registration deadlines, and preserve documentation.