After the oral argument in POM Wonderful LLC v. Coca-Cola Co. (pdf), No. 12-761, the Supreme Court appeared all but certain to allow competitors to sue for false advertising under the Lanham Act over labels of FDA-regulated food products.  Food manufactures have been waiting to see just how broad the ruling would be and whether it would affect the onslaught of consumer class actions challenging food and beverage labels.  The wait is over, and the POM v. Coke decision, while effecting a dramatic change in competitor actions, should have little impact on consumer class actions.

As described by the Supreme Court, here are the facts of the case:  POM markets a juice product labeled “Pomegranate Blueberry 100% Juice,” which consists entirely of pomegranate and blueberry juices.  Coke (under its Minute Maid brand) markets “Pomegranate Blueberry Flavored Blend of 5 Juices,” a competing product that contains 99.4% apple and grape juices, with pomegranate, blueberry, and raspberry juices accounting for the remaining 0.6%.  The label on the Minute Maid product features a picture of all five fruits and the words “Pomegranate Blueberry” in a larger font than the words “Flavored Blend of 5 Juices.”  Significantly, the Minute Maid label complies with the technical labeling rules set out in the federal Food, Drug, and Cosmetic Act (FDCA) and FDA’s related regulations for naming a flavored juice blend.

POM alleged that Coke’s product name and label violate the Lanham Act’s false-advertising provision because (according to POM) consumers will be fooled into thinking there is more pomegranate and blueberry juice in the product than there really is.  The district court and Ninth Circuit rejected the Lanham Act claims, accepting Coke’s argument  that because juice labeling is pervasively regulated by FDA, applying generalized principles of false advertising under the Lanham Act would destroy the uniform, national labeling standard announced by the agency under the FDCA.  As the Ninth Circuit put it, “the FDCA and its regulations bar pursuit of both the name and labeling aspect” of the Lanham Act claim because allowing the claim would “undermine the FDA’s regulations and expert judgments” about how juices may and should be included in the product name.

The Supreme Court unanimously reversed the Ninth Circuit’s decision in an opinion by Justice Kennedy.  In analyzing whether one federal statute (the FDCA) precludes a remedy available under another (the Lanham Act), the Court ruled that the FDCA and Lanham Act can be harmonized because they are “complementary and have separate scopes and purposes” and—unlike FDCA’s express preemption of state-law claims—neither statute “discloses a purpose” by Congress to bar competitor suits like POM’s.  (A more detailed discussion of the Court’s opinion is available here.)  Notably—although the Court repeatedly tells us that the FDCA and Lanham Act can get along—the opinion never actually does the hard work of harmonizing Coke’s compliance with the FDCA’s detailed rules for naming flavored juice blends with POM’s theory of liability challenging the FDCA-compliant name under a generalized theory of false advertising.

By contrast with competitor lawsuits, the Court’s decision should have virtually no impact on food labeling consumer class actions.  While the Court expressed the view that consumers will be indirect beneficiaries of competitor Lanham Act claims over allegedly misleading labels, it made clear that its decision does not address or alter the interplay between state consumer protection laws or consumer suits and the FDCA.  In other words, the decision does not in any way undermine preemption principles that would apply to state-law claims challenging labels regulated by FDA.  That’s important not just for food companies facing consumer class actions, but also to avoid a problem the Court specifically recognized in its decision: the “disuniformity that would arise from the multitude of state laws, state regulations, state administrative agency rulings, and state-court decisions that are partially forbidden by the FDCA’s pre-emption provision.”  Though the Court correctly recognizes the resulting chaos if each state could impose non-identical labeling requirements, it characterizes the potential disuniformity from the potential tension between the FDCA and the Lanham Act a result that Congress envisioned.

Whether the Court was right or wrong about that, one thing is clear:  In creating food labels, food companies should consider not only what the FDCA and federal regulations say, but also analyze the potential risks of competitor lawsuits under the Lanham Act.  We will have more to say about these issues on a webinar tomorrow; interested clients or friends of the firm may register for the webinar here. 

 

 

The plaintiffs’ bar continues to file consumer class actions challenging food and beverage labels en masse, especially in the Northern District of California—also known as the “Food Court.” One particular line of cases—at least 52 class actions, at last count—targets companies selling products containing evaporated cane juice. The battle over evaporated cane juice has become the latest front in the war over whether federal courts should apply the primary-jurisdiction doctrine and dismiss or stay food class actions while awaiting guidance from the federal Food and Drug Administration.

In these cases, plaintiffs allege that the term “evaporated cane juice” is misleading because (in their view) it disguises the fact that the ingredient is a type of “sugar”; they contend that the ingredient  should be identified as “sugar.” Their theory rests almost entirely on a draft guidance that the FDA issued in 2009, in which the agency proposed the ingredient be called “dried cane syrup” (notably, not “sugar”), and invited public comment on the issue. That guidance suggested that the name “evaporated cane juice” not be used because it suggests the ingredient is a juice.

In response to these lawsuit, many defendants have emphasized that the FDA’s 2009 guidance not only is non-binding, but that the existence of the guidance establishes that the FDA is examining the precise issue underlying plaintiffs’ theory of liability. Accordingly, defendants argue, courts should let the agency finish its work. Or, put another way, because the federal Food, Drug, and Cosmetic Act squarely authorizes the FDA to regulate the names of ingredients as part of its power to prescribe uniform national standards for food labels, the issue is within the FDA’s “primary jurisdiction.” Thus, as we have contended in advancing the primary-jurisdiction argument, the issue should be decided by an expert agency, not via litigation brought by profit-motivated consumer class action lawyers.

How have these arguments fared? Because the FDA did not take action for over four years after issuing the 2009 draft guidance, plaintiffs had a great deal of success in convincing courts that the FDA was not actively addressing the evaporated-cane-juice issue further and therefore that applying the primary-jurisdiction doctrine was inappropriate.

All that changed in March 2014, when the FDA published a notice in the Federal Register reopening the comment period on the 2009 draft guidance and emphasizing that it has “not reached a final decision on the common or usual name for” evaporated cane juice and that it “intend[s] to revise the draft guidance, if appropriate, and issue it in final form.” [Our firm recently filed a comment with the FDA on this issue.]

As if a light had been switched on, virtually every court to consider the issue since the March notice—at least 10 class actions so far—has ruled in favor of deferring to the FDA’s primary jurisdiction in evaporated-cane-juice cases. This overwhelming trend is welcome news.

But from our perspective, the fact that the FDA recently reiterated its interest in this area should not have been necessary to trigger the primary-jurisdiction doctrine. Indeed, even before the March 2014 notice, the question of the proper labeling of evaporated cane juice was one within the primary jurisdiction of the FDA, as at least one court recognized.

To be sure, as one judge has put it, whether the FDA (or another regulatory agency) “has shown any interest in the issues presented by the litigants” appears to be an “unofficial fifth factor” that influences courts grappling with whether primary jurisdiction should be applied in a given case. Greenfield v. Yucatan Foods, L.P., — F. Supp. 2d –, 2014 WL 1891140, at *4-5 (S.D. Fla. May 7, 2014). But this “unofficial fifth factor” is neither necessary nor part of the four, well-recognized factors for applying primary jurisdiction: “(1) [a] need to resolve an issue that (2) has been placed by Congress within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory authority that (4) requires expertise or uniformity in administration.” Clark v. Time Warner Cable, 523 F.3d 1110, 1115 (9th Cir. 2008).

The same factors were satisfied in the evaporated-cane-juice context even before the March 2014 notice.  And—speaking more generally—uncertainty over when the FDA will act should not be treated as an invitation for different courts to apply different state laws and develop differing labeling regimes.

Here’s hoping for a few more helpings of primary jurisdiction at the Food Court—and a few more scoops of uniformity and certainty for the food and beverage industry.