Active: State lawsuit filed to end illegal agency rulemaking

Grant Krueger’s 34 years in the restaurant business began as a dishwasher and busboy in his hometown of Detroit. He later earned a business degree from the University of Arizona, spent ten years running a pub, self-storage complex, and homebuilding company in Mexico before returning to Tucson, Arizona, where he owns five restaurants and employs 225 staff members under the Union Hospitality Group, which he founded in 2010.

Over his three-plus decades in the restaurant business, he’s seen first-hand the impact of reckless government policy, including inflationary pressures, wage mandates, and COVID decrees.

Now, at a time when restaurants and restaurant-goers alike already are struggling, and with inflated food prices, a state agency has put “salsa on the tacos” with a new cage-free egg rule that will drive up the price of this critical food staple while poaching his rights and scrambling the rule of law.

Hatched by the Arizona Department of Agriculture (AZDA) in 2022, the state’s Cage-Free Egg Rule demands that as of January 1, 2025, all eggs and egg products sold in the state must come from hens that were housed in a cage-free manner. The only exception is for egg producers with fewer than 20,000 egg-laying hens.

Cage-free eggs cost more to produce than conventional methods, and AZDA estimates the new rule would add between a penny and 3.25 cents per egg, or $2.71 to $8.79 per person per year. With yearly egg consumption pegged at 270 eggs a year and a statewide population of nearly 7.5 million people, the increase in costs for Arizonans would range from a staggering $20 million to nearly $66 million.

The restaurant industry as a whole operates on very slim profit margins of 4% to 5% on average. At minimum, around 95% of money coming in the door goes right back out to pay not only for food, but for employees, insurance, utilities, and—depending on the establishment—extras like television and live music. As AZDA itself admitted, “Retailers will likely pass some of the increased costs to consumers.”

Even for Grant’s small restaurant group, hiking eggs’ cost by even one cent could force Grant either to cut costs elsewhere or raise prices just to pay the bills and keep the doors open.

Despite the direct impact on their bottom lines, neither Grant nor any of his fellow restaurateurs had a seat at the rulemaking table. Nor did voters or lawmakers; instead, the state’s prominent egg producers wanted it on their own terms.

The producers knew their preferred rule differed from a voter ballot initiative, so they tapped AZDA bureaucrats to whip up the rule administratively—that is, with no input from any other stakeholders.

The result is an arbitrary, costly rule that will raise prices for the same businesses and consumers who were intentionally and illegitimately cut out of the policy making process.

Administrative agencies like AZDA do not have the power to make major policy decisions so broad in impact, scope, and cost. That power lies with legislators and the people who elect them. Yet, AZDA circumvented the proper lawmaking process and the separation of powers to promulgate a major rule, and it did so at the behest of one of its regulated industries and at the expense of everyone else.

Represented at no charge by Pacific Legal Foundation and the Goldwater Institute, Grant is fighting back with a state lawsuit challenging AZDA’s illegal power grab to protect livelihoods and restore the rule of law for all Arizonans.

What’s At Stake?

  • Only a state’s elected representatives can make laws for residents of that state. These representatives cannot cede their lawmaking power to unaccountable bureaucrats. Doing so predictably results in rules that benefit regulators and the regulated industry at the expense of everyone else.

Case Timeline

March 28, 2024
Motion for Summary Judgment
Maricopa County Superior Court
November 16, 2023
Maricopa County Superior Court