POSTED IN ADVERTISING
In Quesada
v. Herb Thyme Farms, Inc., a unanimous California Supreme Court held that a
California putative consumer class can assert state law claims arising from the
purportedly false “organic” labeling of produce. In so doing, the court
reversed a decision stating that such claims are preempted by federal law
addressing the use of “organic” on product labels. Quesada mirrors,
in many respects, the U.S. Supreme Court’s ruling last year in Pom
Wonderful LLC v. The Coca-Cola Company, which held that compliance with federal regulations
governing product labeling will not insulate food and beverage companies from
claims of false advertising arising under the Lanham Act.
In her complaint, Michelle Quesada
alleged that Herb Thyme Farms, Inc. (“Herb Thyme”) sold bags of herbs labeled
as “organic” although the bags contained a mix of organically-grown and
conventionally-grown herbs. Indeed, she alleged that “Herb Thyme packages
and labels as organic some herbs that are entirely conventionally grown.”
Ms. Quesada accordingly contended having “purchased Herb Thyme’s ‘Fresh
Organic’ herbs at a premium in the belief that they were, in fact, 100 percent
organic” even though they were not. Her complaint asserted several
California state consumer fraud protection and unfair competition causes of action.
At the trial court level, Herb Thyme
sought judgment on the pleadings by arguing that the Organic Foods Production
Act of 1990 (7 U.S.C. §§ 6501–6522, herein “the Organic Foods Act”) preempted
Ms. Quesada’s state law claims. The trial court entered judgment in favor
of Herb Thyme, finding that the Organic Foods Act preempted the state law
claims, both expressly and implicitly. The Court of Appeal affirmed the
trial court’s decision on the basis of implicit preemption only, explaining
that “such [consumer fraud] suits were a potential obstacle to Congress’s
purposes and objectives of establishing uniform national standards for organic
production and labeling.”
The California Supreme Court granted
review to examine these preemption issues. After examining the history of
the use of the word “organic” and laws regulating its commercial use, the court
explained that the Organic Foods Act explicitly preempts state laws in only two
ways—to the extent they (1) define “organic” or (2) set up an organic
certification process (unless the certification program is certified by the
USDA).
The court observed
no “language of exclusivity . . . included in the provisions of the Organic
Foods Act governing sanctions for misuse of the organic label.” Thus, the
court resolved that the Organic Foods Act imposes standards that “are minimum,
not absolute.” After reviewing the opinions of other courts that have
addressed the issue of express preemption of consumer fraud claims, the Quesada court “conclude[d that] the Organic
Foods Act does not expressly preempt general state consumer fraud statutes.”
The court then turned its focus to the
issue of implicit, or “obstacle,” preemption. Herb Thyme argued, and the
lower courts agreed, that the state consumer fraud claims pled in this case
would interfere with the congressional goals animating the Organic Foods
Act. Noting the presumption against preemption still supported by a
narrow majority of sitting justices of the United States Supreme Court, and
that “[t]he regulation of food labeling to protect the public is
quintessentially a matter of longstanding local concern,” the California
Supreme Court reasoned that if “state consumer protection laws regulating
deceptive food labeling are at issue[,]” the presumption “applies with particular
force.”
The court next addressed Congress’s
goals in passing the Organic Foods Act, identifying them as: (1) establishing
nationwide standards for the marketing of “organic” products, (2) “assur[ing]
consumers that organically produced products meet a consistent standard,” and
(3) facilitating the interstate commerce of “organic” products.
A uniform
national standard for marketing organic produce serves to boost consumer
confidence that an ‘organic’ label guarantees compliance with particular
practices, and also deters intentional mislabeling, ‘so that consumers are sure
to get what they pay for.’
The court then reasoned that “permitting
state consumer fraud actions would advance, not impair, these goals [because
s]ubstitution fraud, intentionally marketing products as organic that have been
grown conventionally, undermines the assurances the USDA Organic label is
intended to provide.” The court summarized its analysis of this issue as
follows:
[T]he
complaint here alleges Herb Thyme has engaged in fraud by intentionally
labeling conventionally grown herbs as organic, thereby pocketing the
additional premiums organic produce commands. The purposes and objectives
underlying the Organic Foods Act do not suggest such suits are an obstacle; to
the contrary, a core reason for the act was to create a clear standard for what
production methods qualify as organic so that fraud could be more effectively
stamped out and consumer confidence and fair market conditions promoted. Nor
does anything in the text or background of the act and its regulations indicate
Congress intended remedial exclusivity for the enforcement mechanisms it
provided. Finding no obstacle to congressional purposes and objectives, we
conclude the complaint here is not preempted.
Thus, the mere existence of extensive
regulations governing the labeling of “organic” produce, and nationwide
uniformity as an explicit goal for such regulations can no longer serve to
insulate food and beverage companies from consumer fraud claims in California.
More broadly, this decision adds to the growing body
of law that is facilitating and encouraging the cottage industry of false
advertising litigation, particularly in California, in which most of these
cases have been filed during the past five years.
No comments:
Post a Comment