By Michael J. O’Flaherty and Stewart D. Fried
In a recent opinion delivered by Justice Kennedy (with Justice Breyer recused), the U.S. Supreme Court unanimously held that competitors may bring Lanham Act claims challenging food labels, even if such labels technically comply with regulations promulgated by the Food and Drug Administration (FDA) under the Federal Food, Drug, and Cosmetic Act (FD&C Act). This essentially means that the FD&C Act and its regulations are not a ceiling on the regulation of food labeling because Congress intended the Lanham Act and the FD&C Act to complement each other with respect to labeling. While this ruling substantially affects how food labeling compliance should be analyzed prospectively from a Lanham Act/potential competitor lawsuit perspective, it does not necessarily impact directly how such compliance must be analyzed from a State consumer protection/class action lawsuit perspective, especially inasmuch as FD&C Act § 403A makes federal standards for certain food label information nationally uniform (i.e., preemptive of challenges alleging another standard applicable).
In POM Wonderful LLC v. Coca-Cola Co., No. 12-761 (argued April 21, 2014; decided June 12, 2014) [573 U. S. ___ (2014)], POM Wonderful (POM), which markets a pomegranate-blueberry juice blend, filed a Lanham Act lawsuit against the Coca-Cola Company (Coca-Cola), alleging that the name, label, marketing, and advertising of one of Coca-Cola’s juice blends mislead consumers into believing the product consists predominantly of pomegranate and blueberry juice, when it actually consists predominantly of less expensive apple and grape juices. POM sells a juice product labeled “Pomegranate Blueberry 100% Juice,” which consists entirely of pomegranate and blueberry juices. Coca-Cola (under its Minute Maid brand) sells “Pomegranate Blueberry Flavored Blend of 5 Juices,” which contains about 99% apple and grape juices, with pomegranate, blueberry, and raspberry juices accounting for only the remaining amount. 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.” Importantly, the Minute Maid label technically complied with the labeling rules provided in the FD&C Act and in FDA’s related regulations for naming a flavored juice blend, 21 C.F.R. § 102.33.
The Court of Appeals for the Ninth Circuit affirmed the decision of the federal district court judge from the Central District of California ,which essentially had held that, in the realm of food labeling, a Lanham Act claim like POM’s is precluded by the FD&C Act. 679 F. 3d 1170 (9th Cir. 2012). The Supreme Court reversed the Ninth Circuit decision and remanded the case for further proceedings.
The Lanham Act permits one competitor to sue another for unfair competition arising from false or misleading product descriptions. The FD&C Act prohibits the misbranding of food marketed in interstate commerce. To implement the FD&C Act’s provisions, FDA has promulgated regulations regarding food labeling, including one concerning the common or usual name for juice blends. Unlike the Lanham Act, which relies (in large part) for its enforcement on private lawsuits brought by injured competitors, the FD&C Act and its implementing regulations give the federal government nearly exclusive enforcement authority and do not permit private enforcement lawsuits. The FD&C Act also preempts certain state misbranding laws.
Lanham Act Claims Are Not Preempted by the FD&C Act
The Supreme Court held that, under this statutory structure, competitors may bring Lanham Act claims, like POM’s, challenging food labels regulated under the FD&C Act. The Supreme Court based its holding on two premises. First, it found that the case did not concern preemption, but rather concerned an alleged preclusion of a cause of action under one federal statute (i.e., the Lanham Act) by the provisions of another federal statute (i.e., the FD&C Act). Second, it found that the case entailed statutory interpretation, with analysis of the statutory text, aided by established interpretive rules, controlling. It rejected Coca-Cola’s proposition that the best way to reconcile or harmonize the statutes was to bar POM’s Lanham Act claim.
The Supreme Court also noted that these statutes have co-existed for over 70 years and that neither expressly forbids nor otherwise limits Lanham Act claims that challenge labels that are regulated under the FD&C Act. The Court determined the absence of such a textual provision was “powerful evidence that Congress did not intend FDA oversight to be the exclusive means” of ensuring proper food labeling. Rejecting Coca-Cola’s argument, it concluded that Congress, by taking care to preempt only some state laws, indicated it did not intend the FD&C Act to preclude requirements arising from other sources.
The Supreme Court characterized the Lanham Act and FD&C Act as complementary in scope and purpose. It noted that both statutes address food labeling, but the Lanham Act protects commercial interests against unfair competition, while the FD&C Act protects public health and safety. It also pointed out that the statutes complement each other with respect to remedies — the FD&C Act’s enforcement is largely committed to the FDA, while the Lanham Act empowers private parties to sue competitors to protect their interests on a case-by-case basis – and that allowing Lanham Act suits takes advantage of synergies among multiple methods of regulation.
The Supreme Court also reasoned that if it concluded the FD&C Act precluded Lanham Act claims challenging food labels, doing so could lead to a result that Congress did not intend because the FDA does not necessarily pursue enforcement measures regarding all objectionable labels. This being the case, preclusion of Lanham Act claims could leave commercial interests — and indirectly the public at large — with less effective protection in the food labeling realm.
The Supreme Court sharply rejected Coca-Cola’s argument that Lanham Act claim preclusion is proper because Congress intended national uniformity in food labeling, and is reasonably instructive of how federal courts are likely to treat Lanham Act claims against food companies in the future. First, it is now clear that Congress did not intend to foreclose private enforcement of other federal statutes when it delegated enforcement authority to the federal government pursuant to the FD&C Act. Second, the Court removed any doubt that the FD&C Act’s express preemption provision applies only to state, not federal, law. Lastly, the FD&C Act and its implementing regulations may address food labeling with more specificity than the Lanham Act, but this specificity matters only if the two statutes could not be implemented in full at the same time. The Court determined that neither the statutory structures nor the empirical evidence of which it was aware indicated there would be any difficulty in fully enforcing each statute concurrently according to its terms.
Finally, the Supreme Court rejected the Solicitor General’s middle-ground position that would have precluded Lanham Act claims only to the extent that the FD&C Act or FDA’s regulations specifically require or permit particular language on a food label. Stated differently, had the Supreme Court agreed with this argument, POM’s challenge to the name of the Minute Maid product, which complied with FDA regulations, would have been precluded but its other challenges would not have been barred. Instead, all eight Justices found that government’s position to be fatally flawed because it assumed that the FD&C Act and its regulations established a ceiling on the regulation of food labeling, when Congress intended the Lanham Act and the FD&C Act to complement each other.
Food (and dietary supplement purveyors should keep the POM Wonderful decision in mind prospectively when assessing the enforcement risks attending labeling representations. While the door to Lanham Act claims in food labeling disputes has been blasted open by the Supreme Court’s decision, it remains far from clear whether a plethora of state court consumer protection actions will ensue, especially given the clear statement in the opinion confirming the clear applicability of the FD&C Act’s preemption provisions to state court labeling lawsuits. However, the creativity of the plaintiffs’ bar cannot be underestimated and, as a result, the utility of the decision in class action lawsuits challenging food labeling claims should surface reasonably soon.